Hopefluent Group Holdings Limited - Proxy Solicitation & Information Statement 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in ITC Corporation Limited (the “Company”), you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank manager, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

This circular is addressed to the shareholders of the Company in connection with a special general meeting of the Company to be held on 8 June 2009.

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(Incorporated in Bermuda with limited liability)

(Stock Code: 372) (Warrant Code: 779)

(1) POSSIBLE MAJOR TRANSACTION – SUBSCRIPTION OF THE RIGHTS SHARES IN PYI CORPORATION LIMITED;

(2) REFRESHMENT OF THE 10% LIMIT ON GRANT OF OPTIONS UNDER THE SHARE OPTION SCHEME; AND (3) REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES AND TO REPURCHASE SHARES

Financial Adviser

A notice convening the special general meeting of the Company to be held at B27, Basement, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong on Monday, 8 June 2009 at 11:00 a.m. is set out on pages 252 to 255 of this circular. Whether or not you are able to attend the meeting in person, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the principal place of business of the Company in Hong Kong at 30th Floor, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong, as soon as possible but in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

Hong Kong, 21 May 2009

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Proposed PYI Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Information on PYI and reasons of the PYI Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Business review and prospects of PYI as extracted from the interim report
of PYI for the six months ended 30 September 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Reasons for the Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Effect on earnings and assets and liabilities of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Undertaking and sub-underwriting by Dr. Chan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Refreshment of Scheme Mandate Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Refreshment of Issue Mandate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Refreshment of Repurchase Mandate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
The SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Appendix I – Financial information of the PYI Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Appendix II – Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	172
Appendix III – Unaudited pro forma financial information of the Group. . . . . . . . . . . . . . . . . . . .	234
Appendix IV – Explanatory statement on the New Repurchase Mandate. . . . . . . . . . . . . . . . . . . .	238
Appendix V – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	240
Notice of the SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	252

Accompanying document

– Form of proxy

DEFINITIONS

In this circular, the following expressions shall have the following meanings unless the context otherwise requires:

“associate(s)”	has the meaning ascribed to it in the Listing Rules
“AGM”	the annual general meeting of the Company held on 30 September
	2008
“Board”	the board of Directors
“Capital Reorganisation”	the reorganisation of the share capital of the Company as set out in
	the circular of the Company dated 11 March 2009, which became
	effective on 3 April 2009
“Company” or “ITC”	ITC Corporation Limited (stock code: 372), a company incorporated
	in Bermuda with limited liability and whose issued securities are
	listed on the main board of the Stock Exchange
“Convertible Notes”	the 5% convertible notes due 2009 in the aggregate principal amount
	of HK$200 million issued by the Company on 2 November 2007, all
	of which remained outstanding as at the Latest Practicable Date
“Dr. Chan”	Dr. Chan Kwok Keung, Charles, the controlling Shareholder, the
	chairman of the Company and an executive Director and a non-
	executive director of PYI
“Director(s)”	the director(s) of the Company
“Eligible Persons”	has the meaning ascribed to it in the Share Option Scheme
“Existing Issue Mandate”	the general mandate granted to the Directors at the AGM to allot,
	issue and deal with new Shares
“Existing Repurchase Mandate”	the general mandate granted to the Directors at the AGM to exercise
	the powers of the Company to repurchase Shares on the Stock
	Exchange
“Group”	the Company and its subsidiaries
“Latest Practicable Date”	18 May 2009, being the latest practicable date prior to the printing
	of this circular for the purpose of ascertaining certain information
	contained herein
“Listing Rules”	The Rules Governing the Listing of Securities on the Stock Exchange
“Model Code”	The Model Code for Securities Transactions by Directors of Listing
	Issuers contained in Appendix 10 to the Listing Rules
“New Issue Mandate”	the proposed general mandate to be granted to the Directors to
	exercise all the powers of the Company to allot, issue and otherwise
	deal with new Shares not exceeding 20% of the issued share capital of
	the Company as at the date of the passing of the resolution approving
	the said mandate
“New Repurchase Mandate”	the proposed general mandate to be granted to the Directors to
	exercise all the powers of the Company to repurchase Shares not
	exceeding 10% of the issued share capital of the Company as at the
	date of the passing of the resolution approving the said mandate
“Participation”	the proposed acceptance by the Company, through its subsidiaries,
	of the provisional allotment of not less than 809,025,130 PYI Rights
	Shares in full, being its pro rata entitlement under the PYI Rights
	Issue as at the Latest Practicable Date

DEFINITIONS

“PRC” the People’s Republic of China, which for the purpose of this circular, excludes Hong Kong, Macau Special Administrative Region and Taiwan “PYI” PYI Corporation Limited (stock code: 498), a company incorporated in Bermuda with limited liability and whose issued securities are listed on the main board of the Stock Exchange “PYI Announcement” the announcement of PYI dated 30 April 2009 relating to, inter alia, the PYI Rights Issue “PYI Board” the board of directors of PYI “PYI Group” PYI and its subsidiaries “PYI Rights Issue” the proposed issue by way of rights of the PYI Rights Shares at a subscription price of HK$0.12 per PYI Rights Share on the basis of two PYI Rights Shares for every PYI Share in issue and held on the Record Date “PYI Rights Shares” not less than 3,016,787,034 new PYI Rights Shares and not more than 3,588,897,924 new PYI Rights Shares to be issued and allotted pursuant to the PYI Rights Issue “PYI Share(s)” ordinary share(s) of HK$0.10 each in the share capital of PYI “PYI Shareholder(s)” holder(s) of PYI Share(s) “PYI Warrants” a total of 251,398,919 listed warrants carrying rights to subscribe in cash for 251,398,919 PYI Shares at an initial subscription price of HK$1.00 per PYI Share (subject to adjustments) at any time until 25 September 2009 pursuant to an instrument executed by PYI dated 25 September 2008 (Warrant Code: 849), all of which remained outstanding as at the Latest Practicable Date “Qualifying PYI Shareholder(s)” means the “Qualifying Shareholder(s)” as defined in the PYI Announcement “Record Date” the date as announced by PYI for determining the entitlements of the Qualifying PYI Shareholder(s) to participate in the PYI Rights Issue “Refreshment of Issue Mandate” the proposed refreshment of the Existing Issue Mandate to the New Issue Mandate “Refreshment of Repurchase the proposed refreshment of the Existing Repurchase Mandate to the Mandate” New Repurchase Mandate “Refreshment of Scheme the 10% limit under the Share Option Scheme proposed to be Mandate Limit” refreshed by the Shareholders at the SGM pursuant to which the Board may grant share options to Eligible Persons to subscribe for up to 10% of the Shares in issue as at the date of the passing of the resolution approving such refreshment “Refreshments” the Refreshment of Issue Mandate, the Refreshment of Repurchase Mandate and the Refreshment of Scheme Mandate Limit “Rights Issue” the issue by way of rights of new Shares undertaken by the Company as set out in the circular of the Company dated 9 April 2009 “Rights Shares” 538,951,624 new Shares to be allotted and issued pursuant to the Rights Issue

DEFINITIONS

“Scheme Mandate Limit”	the maximum number of Shares which may be issued upon the
	exercise of all the share options to be granted under the Share Option
	Scheme and such other schemes of the Company which initially shall
	not in aggregate exceed 10% of the Shares in issue as at the date of
	the approval of the Share Option Scheme by the Shareholders and
	thereafter, if refreshed, shall not exceed 10% of the Shares in issue as
	at the date of approval of the refreshed limit by the Shareholders
“SFO”	The Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“SGM”	the special general meeting of the Company to be held on 8 June 2009
	at which resolutions will be proposed to consider and, if thought fit,
	approve the Participation and the Refreshments
“Shareholder(s)”	the holder(s) of the Share(s)
“Share(s)”	ordinary share(s) in the share capital of ITC before and after the
	Capital Reorganisation (as the case may be)
“Share Option Scheme”	the share option scheme of the Company adopted on 16 January 2002
	(as amended on 19 September 2007)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Takeovers Code”	The Hong Kong Code on Takeovers and Mergers issued by the
	Securities and Futures Commission of Hong Kong
“Undertaking”	the irrevocable undertaking given by the Company on 29 April
	2009 as set out under the section headed “Undertaking and sub-
	underwriting by Dr. Chan” in the “Letter from the Board” in this
	circular
“Underwriter”	BOCI Asia Limited, a corporation which is licensed under the SFO
	to carry out Type 1 (dealing in securities) and Type 6 (advising on
	corporate finance) regulated activities for the purpose of the SFO, and
	also the financial adviser to PYI, which is not a connected person of
	the Company
“Warrants”	a total of 538,768,186 listed warrants outstanding as at the Latest
	Practicable Date, carrying rights to subscribe in cash for 26,938,409
	Shares at the subscription price of HK$4.4 per Share (subject to
	adjustments) at any time until 4:10 p.m. on 4 November 2009
	pursuant to an instrument issued by the Company dated 5 November
	2008 (Warrant Code: 779)
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.

LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability)

(Stock Code: 372) (Warrant Code: 779)

Executive Directors: Dr. Chan Kwok Keung, Charles (Chairman) Ms. Chau Mei Wah, Rosanna (Deputy Chairman and Managing Director) Mr. Chan Kwok Chuen, Augustine Mr. Chan Fut Yan Mr. Cheung Hon Kit Mr. Chan Yiu Lun, Alan Independent non-executive Directors: Mr. Chuck, Winston Calptor Mr. Lee Kit Wah Hon. Shek Lai Him, Abraham, SBS, JP

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal place of business in Hong Kong: 30th Floor Bank of America Tower 12 Harcourt Road Central Hong Kong

21 May 2009

To the Shareholders and, for information only,

the holders of the Convertible Notes and/or the Warrants

Dear Sir or Madam,

(1) POSSIBLE MAJOR TRANSACTION – SUBSCRIPTION OF THE RIGHTS SHARES IN PYI CORPORATION LIMITED; (2) REFRESHMENT OF THE 10% LIMIT ON GRANT OF OPTIONS UNDER THE SHARE OPTION SCHEME; AND (3) REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES AND TO REPURCHASE SHARES

INTRODUCTION

The purpose of this circular is to provide you with:

(a) details of the Participation;
(b) details regarding the Refreshments; and
(c) the notice of the SGM.

PROPOSED PYI RIGHTS ISSUE

The PYI Board announced on 30 April 2009 that it proposed to raise approximately HK$362.0 million to HK$430.7 million before expenses by way of the PYI Rights Issue of not less than 3,016,787,034 PYI Rights Shares and not more than 3,588,897,924 PYI Rights Shares on the basis of two PYI Rights Shares for every PYI Share in issue and held on the Record Date at a subscription price of HK$0.12 per PYI Rights Share, payable in full on acceptance. As at the Latest Practicable Date, PYI was an associated company of the Company.

The PYI Rights Issue is conditional upon, among other things, approval of the independent PYI Shareholders at a special general meeting of PYI. Further details in relation to the PYI Rights Issue have been set out in the PYI Announcement.

LETTER FROM THE BOARD

As at the Latest Practicable Date, the Company was interested in 404,512,565 PYI Shares, representing approximately 26.8% of the total issued share capital of PYI, and PYI Warrants of HK$67,418,760. The Company has not acquired any PYI Shares in the past 12 months before the Latest Practicable Date. Given its current interests in PYI, the Company will be entitled to subscribe for not less than 809,025,130 PYI Rights Shares. On the basis of HK$0.12 per PYI Rights Share, the total consideration payable by the Company under the Participation amounts to not less than approximately HK$97.1 million, which exceeds 25% but is less than 100% of one of the applicable ratios of the Company under the Listing Rules. The Participation therefore constitutes a major transaction for the Company under Rule 14.06(3) of the Listing Rules and is subject to the Shareholders’ approval at the SGM. The total consideration payable by the Company under the Participation is proposed to be satisfied in cash from internal resources of the Company. Given the cash balances and other net current assets of the Group and the net proceeds from the Rights Issue, among other things, the Directors believe that the Group will have sufficient resources to subscribe for the PYI Rights Shares under the Participation.

INFORMATION ON PYI AND REASONS OF THE PYI RIGHTS ISSUE

PYI is principally engaged in the business of development and investment in port and other infrastructure projects, land and property development and investment in association with port facilities, treasury investment and, through its subsidiary, Paul Y. Engineering Group Limited, comprehensive engineering and property-related services.

The following is a summary of the consolidated results of the PYI Group for the two years ended 31 March 2008 and 2007 and six months ended 30 September 2008 and 2007 respectively:

Profit before taxation Taxation (charge) credit Profit after taxation (before minority interests)	For the financial year ended 31 March 2008 2007 (audited) (audited) *HK$’000* HK$’000 833,297 326,595 (315,186) 50,552 518,111 377,147	For the six months ended 30 September 2008 2007 (unaudited) (unaudited) *HK$’000* HK$’000 280,081 695,864 (152,233) (268,827) 127,848 427,037

As mentioned in the PYI Announcement, given the recent sluggish Hong Kong stock market and the gloomy economic outlook as a result of the global financial crisis, the directors of PYI consider that the capability of PYI to raise additional equity funding in the foreseeable future is very uncertain. The PYI Board has considered other means of fund raising in both the debt market and the equity market other than the PYI Rights Issue. Fund raising through the debt market will increase the gearing ratio and the interest burden of the PYI Group. Regarding the equity market, a private placement of PYI Shares by its nature excludes the existing PYI Shareholders, and at the same time, results in immediate dilution of existing PYI Shareholders’ interest in PYI. The PYI Board considers that the PYI Rights Issue will enable the PYI Group to strengthen its capital base and to enhance its financial position for future strategic investments as and when opportunities arise. The PYI Rights Issue will give the Qualifying PYI Shareholders the opportunity to maintain their respective pro rata shareholding interests in PYI and, hence the PYI Board considers that fund raising through the PYI Rights Issue is in the interests of PYI and the PYI Shareholders as a whole.

It is also mentioned in the PYI Announcement that the estimated net proceeds from the PYI Rights Issue will be not less than approximately HK$350.0 million but not more than approximately HK$418.7 million and are intended to be used on the PYI Group’s investment in port and port-related projects and as general working capital of the PYI Group.

For further details, please refer to the PYI Announcement.

BUSINESS REVIEW AND PROSPECTS OF PYI AS EXTRACTED FROM THE INTERIM REPORT OF PYI FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008

Financial results

For the six months period under review, the PYI Group recorded a consolidated turnover of about HK$2,790 million (2007: HK$2,432 million), representing an increase of about 15% when compared with that of the last corresponding period. The increase was mainly attributable to the increase in the PYI Group’s business in management contracting.

LETTER FROM THE BOARD

The PYI Group’s gross profit increased by 5% to about HK$169 million (2007: HK$161 million) as compared with the corresponding period last year. Such gross profit represented a gross margin of 6% (2007: 7%) of the consolidated turnover. Profit before taxation of about HK$280 million was achieved as compared with about HK$696 million for the corresponding period last year. The PYI Group’s profit before taxation was composed of:

(i) net gain of about HK$40 million in management contracting and property development management businesses (2007: HK$49 million);
(ii) net gain of about HK$5 million in port and infrastructure development and logistics business (2007: net loss of HK$6 million);
(iii) net gain of about HK$10 million in LPG distribution (2007: net loss of HK$3 million);
(iv) net gain of about HK$16 million in treasury investment (2007: HK$31 million);
(v) net gain of about HK$320 million in property investment (2007: HK$629 million);
(vi) net loss of about HK$4 million in property trading (2007: HK$0.1 million);
(vii) interest income and other income of about HK$17 million (2007: HK$41 million);
(viii) net gain of about HK$24 million (2007: HK$35 million) from share of results of associates and jointly controlled entities;
(ix) net loss in investments held for trading of about HK$35 million (2007: net gain of HK$5 million);
(x) net corporate and other expenses of about HK$75 million (2007: HK$61 million); and
(xi) finance costs of about HK$38 million (2007: HK$24 million).

Net profit for the period attributable to the PYI Shareholders was about HK$74 million (2007: HK$312 million) and basic earnings per share was 4.9 cents (2007: 20.9 cents). The performance was adversely affected by the set back in contribution from the PYI Group’s engineering arm - Paul Y. Engineering Group Limited and its subsidiaries, as well as the reduction in profit contributed from the property investment in Yangkou Port, which 1.95 sq km of land parcel was recognised as investment properties and revalued during the current period when compared with 4.16 sq km of land parcel of the last corresponding period.

When compared with the PYI Group’s financial position as at 31 March 2008, total assets increased by 15% to about HK$11,895 million (31.3.2008: HK$10,361 million) and net current assets decreased by 47% to about HK$72 million (31.3.2008: HK$137 million). These changes were mainly attributable to the PYI Group’s further capital expenditure in Yangkou Port. Consequently, current assets decreased from 1.04 times to 1.02 times of current liabilities. After accounting for the net profit of about HK$74 million net of dividends declared of about HK$13 million as well as surplus arising from RMB exchange translation of about HK$83 million, equity attributable to the PYI Shareholders increased by 6% to about HK$3,588 million (31.3.2008: HK$3,377 million), representing HK$2.38 per share as at 30 September 2008 (31.3.2008: HK$2.24 per share).

Net cash outflow from operating activities was about HK$13 million and that from investing activities was about HK$324 million, and net cash inflow from financing activities was about HK$365 million, resulting in a net increase in available cash and cash equivalents of about HK$28 million for the period under review.

As at 30 September 2008, the net asset value of the PYI Group was approximately HK$3,592.3 million.

Prospects

The global financial meltdown has certainly impacted upon the international trade and hence the economic growth in the PRC. Shipping and logistics sectors along the Yangtze River could not be immune from such effect. It is expected that the RMB4 trillion stimulus program would induce major infrastructure spending along the Yangtze River and in the coastal region of the Yangtze Delta. The PRC is set to launch numerous social and economic programs with a view to maintain economic growth momentum through induced expansion in domestic demands.

LETTER FROM THE BOARD

PYI remains committed to the long term potentials of the Yangtze Strategy. There will be structural adjustments to the composition of PYI’s current port investments made in line with its financial capacity. That may lead to partial divestment of some existing port investments. Increase in financial liquidity will be a key short term focus. During the period under review, PYI has taken measured steps to extend its foothold to the middle reach of Yangtze River by agreeing to acquire 51% stake in Yichang Port – one of the eight largest ports on the Yangtze River. Such earning accretive investment will connect PYI’s ports and logistics network with the upstream and the rest of Yangtze, delivering a more complete bulk cargo network and sustainable returns to the PYI Shareholders.

REASONS FOR THE PARTICIPATION

The Company is an investment holding company which directly and indirectly holds strategic investments in a number of listed companies. The principal activities of the Group comprise investment holding, the provision of finance, property investment and treasury investment.

Based on the unaudited financial information of PYI for the six months ended 30 September 2008, the profit after taxation of the PYI Group decreased in the six months ended 30 September 2008, revenue during the same period grew approximately 14.7%. The unrealised gain from fair value changes in respect of investment properties has a significant impact declining to approximately HK$320 million for the six months ended 30 September 2008 as compared to approximately HK$628 million during the same period in the previous year. Nonetheless, a gain was recorded and hence the value of the investment properties of PYI continued to experience growth.

The Directors consider that the terms of the Participation are fair and reasonable as it will enable the Group to maintain its pro rata shareholding in PYI and to share the benefit from the growth of the PYI Group. On this basis, the Directors consider that the Participation is in the interests of the Group and the Shareholders as a whole.

EFFECT ON EARNINGS AND ASSETS AND LIABILITIES OF THE COMPANY

As a result of the Participation, the Company’s shareholding in PYI will remain the same at approximately 26.8% of the total issued share capital of PYI immediately after completion of the PYI Rights Issue.

There will also be no significant impact on the earnings, assets and liabilities of the Group immediately following the Participation as the increase in the 809,025,130 PYI Rights Shares at a total consideration of approximately HK$97 million to be booked in the interests in associates account of the Group will be offset by a decrease in cash and bank balances.

If ITC does not subscribe for any PYI Rights Shares, its interests in PYI will be diluted to approximately 8.9% of the enlarged total issued share capital of PYI after completion of the PYI Rights Issue, assuming no conversion or subscription rights attaching to the convertible notes, the warrants and the share options of PYI are exercised on or before the Record Date. In such dilution event, the Group, according to its books and records as at 30 September 2008, will record a loss on deemed disposal of approximately HK$773.8 million and investment in PYI will be accounted for as available-for-sale investment in accordance with Hong Kong Accounting Standard 39 “Financial Instruments: Recognition and Measurement” and the use of equity method will be discontinued from the date that PYI ceased to be an associate of the Group.

UNDERTAKING AND SUB-UNDERWRITING BY DR. CHAN

The Company has given the Undertaking in favour of PYI and the Underwriter pursuant to which it has undertaken, inter alia, that the PYI Shares and the PYI Warrants beneficially owned by the Company on the date of the Undertaking will remain registered in the name of the Company or its subsidiary(ies) and beneficially owned by the Company as at the Record Date or 16 July 2009 (whichever is the earlier), and that it will not, and will procure its subsidiaries not to, exercise the subscription rights attaching to the PYI Warrants beneficially owned by the Company up to the Record Date or 16 July 2009 (whichever is earlier). The Undertaking will also lapse if the PYI Rights Issue does not become unconditional in accordance with its terms. ITC has also expressed its intention that subject to the approval of the Shareholders in accordance with the requirements of the Listing Rules (if required), it will procure its subsidiaries to accept the provisional allotment of the 809,025,130 PYI Rights Shares under the PYI Rights Issue and the Board also intends to recommend, in accordance with the requirements of the Listing Rules, the Shareholders to vote in favour of the proposed resolution approving the Participation at the SGM.

LETTER FROM THE BOARD

The Company has been informed by Dr. Chan that Dr. Chan has entered into a sub-underwriting agreement with the Underwriter on 29 April 2009. Under the sub-underwriting agreement, Dr. Chan had agreed, inter alia, to subscribe or procure subscribers to subscribe for up to 909,025,130 PYI Rights Shares (which include the 809,025,130 PYI Rights Shares under the Participation if the Company chooses not to take up) representing approximately 20.1% of the enlarged issued share capital of PYI immediately after completion of the PYI Rights Issue, assuming no conversion or subscription rights attaching to the convertible notes, the warrants and the share options of PYI are exercised on or before the Record Date.

For further details, please refer to the PYI Announcement.

REFRESHMENT OF SCHEME MANDATE LIMIT

By an ordinary resolution passed at a special general meeting of the Shareholders held on 16 January 2002, the Company adopted the Share Option Scheme (which was amended on 19 September 2007).

The Company may refresh the Scheme Mandate Limit by an ordinary resolution of the Shareholders at general meeting provided that the Scheme Mandate Limit so refreshed shall not exceed 10% of the total number of issued Shares as at the date of the Shareholders’ approval of the refreshing of the Scheme Mandate Limit. Options previously granted under any existing schemes (including options outstanding, cancelled or lapsed in accordance with the relevant scheme rules or exercised options) shall not be counted for the purpose of calculating the Scheme Mandate Limit as refreshed.

Notwithstanding the foregoing, the maximum number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option scheme(s) of the Company must not in aggregate exceed 30% of the total number of Shares in issue from time to time.

As at 16 January 2002 (being the date of adoption of the Share Option Scheme), the total number of issued Shares was 630,960,774, thus the Scheme Mandate Limit was 63,096,077 Shares. By an ordinary resolution passed on 30 September 2008, the Scheme Mandate Limit was refreshed to 269,460,526 Shares (representing approximately 10% of the Shares in issue as at 30 September 2008).

As at the Latest Practicable Date, assuming the Rights Issue was completed, there were 673,689,530 Shares in issue and options outstanding under the Share Option Scheme whereby a total of 9,730,000 Shares might be issued at an exercise price of HK$7.7 per Share (subject to adjustments).

Assuming no further issue (except the issue of Rights Shares pursuant to the Rights Issue) or repurchase of Shares prior to the SGM and that the Rights Issue is completed, upon the approval of the Refreshment of Scheme Mandate Limit by the Shareholders at the SGM, the Company may grant options entitling holders thereof to subscribe for a total of 67,368,953 Shares (representing approximately 10% of the Shares in issue as at the date of the SGM).

To the extent that there are any unutilized options under the Scheme Mandate Limit as refreshed by the Shareholders on 30 September 2008 which amounted to options, if granted, entitling holders thereof to subscribe for a total of 26,946,052 Shares as at the Latest Practicable Date, all such unutilized options will be considered as lapsed upon the approval of the Refreshment of Scheme Mandate Limit at the SGM and the Company will not be allowed to grant any further options pursuant to the unutilized options. No options may be granted if this will result in the number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option scheme(s) of the Company exceed 30% of the total number of Shares in issue from time to time.

The Company believes the Refreshment of Scheme Mandate Limit would allow the Company to achieve the purpose of the Share Option Scheme which is to provide incentive or reward to Eligible Persons for their contribution to, and continuing efforts to promote the interests of, the Group. The Directors consider that the Refreshment of Scheme Mandate Limit is in the interests of the Group and the Shareholders as a whole as it provides the Group with more flexibility in providing incentives to those Eligible Persons by way of granting of options.

The Refreshment of Scheme Mandate Limit is conditional on:

(a) the passing of an ordinary resolution to approve the Refreshment of Scheme Mandate Limit by the Shareholders at the SGM; and

LETTER FROM THE BOARD

(b) the Listing Committee of the Stock Exchange granting the listing of and permission to deal in the Shares (representing 10% of the Shares in issue as at the date of the passing of the resolution approving the Refreshment of Scheme Mandate Limit) which may fall to be issued pursuant to the exercise of options under the Share Option Scheme and any other share option scheme(s) of the Company.

Application will be made to the Listing Committee of the Stock Exchange for the granting of the listing of and permission to deal in the Shares (representing 10% of the Shares in issue as at the date of the passing of the resolution approving the Refreshment of Scheme Mandate Limit) which may fall to be issued pursuant to the exercise of options under the Share Option Scheme and any other share option scheme(s) of the Company.

REFRESHMENT OF ISSUE MANDATE

At the AGM, the Directors were granted the Existing Issue Mandate to allot, issue and deal with new Shares up to 20% of the aggregate issued share capital of the Company as at the date of such meeting. As at the date of the AGM, 2,694,605,269 Shares were in issue and accordingly, a maximum of 538,921,053 new Shares may be issued under the Existing Issue Mandate.

Since the AGM and up to the Latest Practicable Date, the Existing Issue Mandate had not been utilized.

Upon completion of the Rights Issue on 22 May 2009, the number of issued Shares will be 673,689,530 Shares, inclusive of Shares issued pursuant to the exercise of Warrants. The conditional bonus issue of Warrants by the Company to the Shareholders on the basis of one Warrant for every five Shares was described in the prospectus of the Company dated 21 October 2008.

In order to (a) replace the Existing Issue Mandate to reflect the changes in the issued share capital as a result of the Capital Reorganisation and completion of the Rights Issue; and (b) provide flexibility and discretion to the Directors to issue new Shares in the future, the Directors propose to the Shareholders an ordinary resolution to grant the New Issue Mandate such that the Directors can exercise the powers of the Company to issue new Shares up to 20% of the issued share capital of the Company as at the date of the SGM.

Notwithstanding that the Existing Issue Mandate has not been utilised since its approval at the AGM, the Directors consider that following completion of the Rights Issue, the Existing Issue Mandate is insufficient to provide the necessary financial flexibility need for the efficient operation of the Group, and will not enable the Group to raise fund in a timely manner to take advantage of opportunities as they may arise. The availability of a greater buffer to allot, issue or otherwise deal with an enlarged number of Shares by way of the Refreshment of the Issue Mandate is beneficial to the Group and the Shareholders as a whole.

Rules 13.36(4)(a), (b) and (c) of the Listing Rules provides, among others things, that any refreshments of the general mandate before the next annual general meeting shall be subject to, inter alia, any controlling shareholder abstaining from voting in favour of the proposed resolution to approve the refreshment of the Issue Mandate and advice from an independent financial adviser is required to be given to the shareholders.

Under Rule 13.36(4)(e) of the Listing Rules, where an issuer offers or issues securities to its shareholders pro rata to their existing holdings, such as in the case of the Rights Issue and the bonus Warrants, (including where overseas shareholders are excluded for legal or regulatory reasons), it will not be necessary for the issuer to comply with Rule 13.36(4)(a), (b) or (c) of the Listing Rules in order for it to refresh its general mandate immediately thereafter such that the amount in percentage terms of the unused part of the general mandate upon refreshment is the same as the unused part of the general mandate immediately before the issue of securities. As the Refreshment of the Issue Mandate is proposed by reason of the Rights Issue, Rule 13.36(4) (e) of the Listing Rules applies. Hence, no advice from an independent financial adviser is required and no Shareholders will be required to abstain from voting on the proposed resolution approving the Refreshment of the Issue Mandate.

Subject to the approval of the Shareholders for the Refreshment of Issue Mandate, and assuming that no other Share (except the issue of Rights Shares pursuant to the Rights Issue) will be issued or repurchased by the Company and no other change to the issued share capital of the Company on or prior to the date of the SGM and that the Rights Issue is completed, the Shares in issue as at the date of the SGM will be 673,689,530 Shares, which means that under the New Issue Mandate, the Directors will be authorised to allot and issue a maximum of 134,737,906 Shares if the Refreshment of Issue Mandate is approved by the Shareholders at the SGM.

REFRESHMENT OF REPURCHASE MANDATE

At the SGM, it will be proposed, by way of an ordinary resolution, that the Directors be given a general and unconditional mandate to exercise all powers of the Company to repurchase Shares on the Stock Exchange up to a maximum of 10% of the share capital of the Company in issue as at the date of the passing of the said resolution. 9

LETTER FROM THE BOARD

The Company at present does not have any plan for repurchases of Shares. Repurchases will only be made when the Directors believe that such a repurchase will benefit the Group and the Shareholders. Considering the rapid changes in the market conditions, the New Repurchase Mandate can provide more flexibility to the Directors to enhance the net asset value of the Company and/or its earnings per Share. An explanatory statement containing information relating to the New Repurchase Mandate as required pursuant to the Listing Rules is set out in Appendix IV to this circular.

THE SGM

A notice convening the SGM to be held at B27, Basement, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong on Monday, 8 June 2009 at 11:00 a.m. is set out on pages 252 to 255 of this circular, at which resolutions will be proposed to consider and, if thought fit, to approve the Participation and the Refreshments.

A form of proxy for use at the SGM is enclosed. If you are not able to attend the SGM, please complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the principal place of business of the Company in Hong Kong at 30th Floor, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong, as soon as possible but in any event not less than 48 hours before the time appointed for holding such meeting or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof (as the case may be) should you so wish.

RECOMMENDATION

The Directors consider that the Participation is on normal commercial terms and that such terms are fair and reasonable and in the interests of the Group and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Participation. Despite Dr. Chan has entered into a sub-underwriting agreement with the Underwriter on 29 April 2009 as mentioned above, he is not regarded as having a material interest in the PYI Rights Issue as he has indicated to the Company that he will exercise his right as controlling Shareholder to vote in favour of such proposed resolution. As at the Latest Practicable Date, to the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, none of the Shareholders had any material interest in the PYI Rights Issue. Therefore, no Shareholder is required to abstain from voting on the Participation at the SGM.

The Directors, having taken into account, inter alia, the terms of the New Issue Mandate and the New Repurchase Mandate, consider that the Refreshments are in the interests of the Group and the Shareholders as a whole and are fair and reasonable. Accordingly, it recommends the Shareholders to vote in favour of the relevant ordinary resolutions to be proposed at the SGM to approve the Refreshments. Pursuant to the requirement of the Listing Rules, all resolutions put to the vote of the Shareholders at the SGM will be taken by way of poll.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in appendices to this circular and the notice convening the SGM.

Yours faithfully, For and on behalf of the Board ITC Corporation Limited Dr. Chan Kwok Keung, Charles Chairman

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION OF PYI GROUP

Set out below is a summary of the audited consolidated results and financial position of the PYI Group for the three years ended 31 March 2008, as extracted from the annual report of the Company for the year ended 31 March 2008, and the unaudited consolidated results and financial position of the PYI Group for the six months ended 30 September 2008, as extracted from the interim report of the Company for the six months ended 30 September 2008:

RESULTS

Turnover Profit before taxation Taxation (charge) credit Profit for the year/period Attributable to Equity holders of PYI Minority interests	Audited For the year ended 31 March 2008 2007 2006 HK$’000 HK$’000 HK$’000 (restated) (restated) 5,502,543 4,643,712 3,242,806 833,297 326,595 367,128 (315,186) 50,552 (52,804) 518,111 377,147 314,324 359,982 345,665 278,861 158,129 31,482 35,463 518,111 377,147 314,324	Unaudited 30 September 2008 2007 HK$’000 HK$’000 (restated) 2,789,918 2,431,662 280,081 695,864 (152,233) (268,827) 127,848 427,037 74,063 312,160 53,785 114,877 127,848 427,037

ASSETS AND LIABILITIES

Total assets Total liabilities Attributable to: Equity holders of PYI Share-based payment reserve of a subsidiary Minority interests	2008 HK$’000 10,361,473 (6,252,163) 4,109,310 3,377,085 5,280 726,945 4,109,310	Audited As at 31 March 2007 2006 HK$’000 HK$’000 7,621,447 5,981,678 (4,372,598) (2,971,741) 3,248,849 3,009,937 2,771,852 2,570,632 981 137 476,016 439,168 3,248,849 3,009,937

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

2. UNAUDITED ACCOUNTS OF THE PYI GROUP FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008

Set out below is the unaudited consolidated financial statements of the PYI Group together with the relevant notes to the accounts, as extracted from the interim report of PYI for the six months ended 30 September 2008.

Condensed Consolidated Income Statement

For the six months ended 30 September 2008

Notes
Turnover
3
Cost of sales
Gross profit
Other income
4
Administrative expenses
Distribution costs
Other expenses
Finance costs
Gain from fair value changes in respect
of investment properties
9
Gain on disposal of interest in an associate
Share of results of associates
Share of results of jointly controlled entities
Profit before taxation
5
Taxation
6
Profit for the period
Attributable to:
Equity holders of the Company
Minority interests
Distribution
7
Earnings per share
8
Basic
Diluted

Unaudited
Six months
ended 30 September
2008
2007
HK$’000
HK$’000
(restated)
2,789,918
2,431,662
(2,620,604)
(2,270,447)
169,314
161,215
41,491
50,807
(162,907)
(135,763)
(26,028)
(22,199)
(46,895)
(1,843)
(38,343)
(23,630)
319,572
628,449
–
3,459
23,854
35,341
23
28
280,081
695,864
(152,233)
(268,827)
127,848
427,037
74,063
312,160
53,785
114,877
127,848
427,037
12,833
22,467
HK4.9 cents
HK20.9 cents
HK4.9 cents
HK20.5 cents

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Condensed Consolidated Balance Sheet

At 30 September 2008

Notes NON-CURRENT ASSETS Investment properties 9 Property, plant and equipment 10 Project under development 11 Properties under development Prepaid lease payments Goodwill Other intangible assets Interests in associates 12 Interests in jointly controlled entities Available-for-sale investments Loans receivable – due after one year Deferred consideration receivable CURRENT ASSETS Stock of properties 13 Prepaid lease payments Inventories Loans receivable – due within one year Amounts due from related companies Amounts due from associates Amounts due from customers for contract works Debtors, deposits and prepayments 14 Investments held for trading Available-for-sale investments Derivative financial instruments Taxation recoverable Pledged bank deposits Short term bank deposits Bank balances and cash	Unaudited 30.9.2008 HK$’000 1,687,316 713,943 3,619,171 107,860 223,168 64,693 62,737 788,602 2,010 814 32,888 2,906 7,306,108 540,817 2,394 25,497 30,000 315,829 57,920 263,384 2,481,926 44,456 56,635 22,899 1,607 113,152 374,940 256,966 4,588,422	Audited 31.3.2008 HK$’000 1,230,351 718,611 3,281,039 172,031 78,770 63,969 61,402 744,213 1,987 1,081 32,222 2,863
		6,388,539
		173,626 2,343 20,171 18,000 296,753 59,777 201,589 2,421,568 61,255 56,635 22,268 3,261 34,269 438,878 162,541
		3,972,934

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Notes CURRENT LIABILITIES Amounts due to customers for contract works Creditors and accrued expenses 15 Amounts due to associates Amounts due to minority shareholders Amounts due to related companies Taxation payable Bank and other borrowings – due within one year 16 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bank and other borrowings – due after one year 16 Convertible notes payable Amounts due to minority shareholders Deferred tax liabilities 17 CAPITAL AND RESERVES Share capital 18 Reserves Equity attributable to equity holders of the Company Share-based payment reserve of a subsidiary Minority interests TOTAL EQUITY	Unaudited 30.9.2008 HK$’000 754,953 2,325,483 180,306 22,840 138,969 96,434 997,638 4,516,623 71,799 7,377,907 1,240,069 124,804 77,336 1,511,730 2,953,939 4,423,968 150,839 3,436,870 3,587,709 4,633 831,626 4,423,968	Audited 31.3.2008 HK$’000 804,442 1,903,832 50,291 1,041 133,051 103,987 839,410
		3,836,054
		136,880
		6,525,419
		966,198 120,551 – 1,329,360
		2,416,109
		4,109,310

		150,709 3,226,376
		3,377,085 5,280 726,945
		4,109,310

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 September 2008

At 1 April 2007 (audited)
Exchange difference arising from
translation of foreign operations
Decrease in fair value of
available-for-sale investments
Share of translation reserve
of associates
Net income (expense) recognised
directly in equity
Profit for the period
Release upon impairment of an
available-for-sale investment
Release upon disposal of
an investment
Release upon disposal of
interest in an associate
Total recognised income
(expense) for the period
Shares repurchased and cancelled
Recognition of equity-settled
share-based payment expense
Release upon lapse of vested option
Issue of shares under share
option scheme
Issue of shares under share
option scheme of a subsidiary
Share issue expenses
Share of other reserves of associates
Dividends recognised as distribution
Dividend distributed by a subsidiary
Recognition of equity component
of convertible notes
Capital contribution from
minority shareholders
At 30 September 2007 (unaudited)
At 1 April 2008 (audited)
Exchange difference arising from
translation of foreign operations
Decrease in fair value of
available-for sale investments
Share of translation reserve
of associates
Net income (expense) recognised
directly in equity
Profit for the period
Total recognised income (expense)
for the period
Recognition of equity-settled
share-based payment expense
Release upon lapse of vested options
Release upon lapse of vested options
of a subsidiary
Issue of shares under share
option scheme
Issue of shares under share option
scheme of a subsidiary
Share issue expenses
Share of other reserves
of associates
Dividends recognised as
distribution_(Note 7)_
Dividend distributed by a subsidiary
Acquisition of subsidiaries
Capital contribution from
minority shareholders
At 30 September 2008 (unaudited)

Attributable to equity holders of the Company
Share-
Share-
based
Investment
Convertible
based
payment
Share
Share
Special
Capital
revaluation
Other
Translation
notes
payment
Warrants
Retained
reserve of a
Minority
capital
premium
reserve
reserve
reserve
reserves
reserve
reserve
reserve
reserve
profits
Sub-total
subsidiary
interests
Total
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
149,171
415,627
124,695
(343,326)
(590)
4,794
74,260
–
21,962
–
2,325,259
2,771,852
981
476,016
3,248,849
–
–
–
–
–
–
29,161
–
–
–
–
29,161
–
6,843
36,004
–
–
–
–
(255)
–
–
–
–
–
–
(255)
–
(145)
(400)
–
–
–
–
–
–
13,438
–
–
–
–
13,438
–
–
13,438
–
–
–
–
(255)
–
42,599
–
–
–
–
42,344
–
6,698
49,042
–
–
–
–
–
–
–
–
–
–
312,160
312,160
–
114,877
427,037
–
–
–
–
809
–
–
–
–
–
–
809
–
–
809
–
–
–
–
–
(2,743)
(200)
–
–
–
–
(2,943)
–
–
(2,943)
–
–
–
–
–
–
650
–
–
–
–
650
–
373
1,023
–
–
–
–
554
(2,743)
43,049
–
–
–
312,160
353,020
–
121,948
474,968
(183)
(5,954)
–
–
–
–
–
–
–
–
–
(6,137)
–
–
(6,137)
–
–
–
–
–
–
–
–
9,706
–
–
9,706
2,482
–
12,188
–
–
–
–
–
–
–
–
(551)
–
551
–
–
–
–
796
22,961
–
–
–
–
–
–
(4,097)
–
–
19,660
–
–
19,660
–
–
–
–
–
–
–
–
–
–
–
–
(189)
1,739
1,550
–
(293)
–
–
–
–
–
–
–
–
–
(293)
–
–
(293)
–
–
–
–
–
1,804
–
–
–
–
–
1,804
–
–
1,804
–
–
–
–
–
–
–
–
–
–
(22,467)
(22,467)
–
–
(22,467)
–
–
–
–
–
–
–
–
–
–
–
–
–
(14,430)
(14,430)
–
–
–
–
–
–
–
8,482
–
–
–
8,482
–
–
8,482
–
–
–
–
–
–
–
–
–
–
–
–
–
63,742
63,742
149,784
432,341
124,695
(343,326)
(36)
3,855
117,309
8,482
27,020
–
2,615,503
3,135,627
3,274
649,015
3,787,916
150,709
438,714
124,695
(343,326)
709
10,638
295,462
8,482
28,260
–
2,662,742
3,377,085
5,280
726,945
4,109,310
–
–
–
–
–
–
62,385
–
–
–
–
62,385
–
15,632
78,017
–
–
–
–
(236)
–
–
–
–
–
–
(236)
–
(31)
(267)
–
–
–
–
–
–
20,563
–
–
–
–
20,563
–
41
20,604
–
–
–
–
(236)
–
82,948
–
–
–
–
82,712
–
15,642
98,354
–
–
–
–
–
–
–
–
–
–
74,063
74,063
–
53,785
127,848
–
–
–
–
(236)
–
82,948
–
–
–
74,063
156,775
–
69,427
226,202
–
–
–
–
–
–
–
–
10,928
–
–
10,928
436
–
11,364
–
–
–
–
–
–
–
–
(9,990)
–
9,990
–
–
–
–
–
–
–
–
–
–
–
–
–
–
312
312
(499)
187
–
130
1,651
–
–
–
–
–
–
–
–
–
1,781
–
–
1,781
–
–
–
–
–
–
–
–
–
–
–
–
(584)
4,273
3,689
–
(210)
–
–
–
–
–
–
–
–
–
(210)
–
–
(210)
–
–
–
–
–
41,038
–
–
–
–
–
41,038
–
–
41,038
–
–
–
–
–
–
–
–
–
12,833
(12,833)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(12,402)
(12,402)
–
–
–
–
–
–
–
–
–
–
–
–
–
4,604
4,604
–
–
–
–
–
–
–
–
–
–
–
–
–
38,592
38,592
150,839
440,155
124,695
(343,326)
473
51,676
378,410
8,482
29,198
12,833
2,734,274
3,587,709
4,633
831,626
4,423,968

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Condensed Consolidated Cash Flow Statement

For the six months ended 30 September 2008

Notes
NET CASH USED IN OPERATING ACTIVITIES
NET CASH USED IN INVESTING ACTIVITIES
Increase in project under development
Additions to property, plant and equipment
Acquisition of assets through acquisition of
subsidiaries, net of cash and cash
equivalents acquired
19
Dividend income received from associates
Proceeds from disposal of interest in
an associate
Proceeds from disposal of property,
plant and equipment
(Increase) decrease in pledged bank deposits
Other investing cash flows
NET CASH FROM FINANCING ACTIVITIES
New bank and other borrowings raised
Capital contribution from minority shareholders
Proceeds from issue of shares of a subsidiary
Proceeds from issue of shares
Repayment of bank and other borrowings
Interest paid
Repayment of amount due to a minority
shareholder
Share issue expenses
Payment for repurchase of shares
Others
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
EFFECT OF FOREIGN EXCHANGE
RATE CHANGES
CASH AND CASH EQUIVALENTS
BROUGHT FORWARD
CASH AND CASH EQUIVALENTS
CARRIED FORWARD
ANALYSIS OF THE BALANCES OF CASH
AND CASH EQUIVALENTS
Short term bank deposits
Bank balances and cash
Bank overdrafts

Unaudited
Six months
ended 30 September
2008
2007
HK$’000
HK$’000
(13,201)
(25,891)
(204,906)
(432,497)
(12,224)
(13,442)
6,168
(1,892)
–
88,250
–
8,860
346
1,623
(78,883)
1,246
(33,866)
(46,330)
(323,365)
(394,182)
928,401
796,397
38,592
63,742
3,689
1,550
1,781
19,660
(531,457)
(449,569)
(74,908)
(44,418)
(1,006)
(3,030)
(210)
(293)
–
(6,137)
–
(2,563)
364,882
375,339
28,316
(44,734)
2,171
2,769
601,419
716,334
631,906
674,369
374,940
393,921
256,966
285,231
–
(4,783)
631,906
674,369

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 September 2008

1. BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

2. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis, except for investment properties and certain financial instruments which are measured at fair values.

The accounting policies used in the condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 March 2008.

In addition, the Group applied the following policy in respect of government grants:

Government grants

Government grants relating to income are deferred and recognised in the income statement over the period necessary to match them with the costs they are intended to compensate.

In the current interim period, the Group has applied, for the first time, new interpretations and amendments (“new HKFRSs”) issued by HKICPA which are effective for the Group’s financial year beginning 1 April 2008. The adoption of these new HKFRSs had no material effect on the results or financial position of the Group for the current or prior accounting periods. Accordingly, no prior period adjustment has been recognised.

The Group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

HKFRSs (Amendments)	Improvements to HKFRSs1
HKAS 1 (Revised)	Presentation of Financial Statements2
HKAS 23 (Revised)	Borrowing Costs2
HKAS 27 (Revised)	Consolidated and Separate Financial Statements3
HKAS 32 & 1 (Amendments)	Puttable Financial Instruments and Obligations Arising on Liquidation2
HKAS 39 (Amendment)	Eligible Hedged Items3
HKFRS 1 & HKAS 27	Cost of an Investment in a Subsidiary, Jointly Controlled Entity or
(Amendments)	Associate2
HKFRS 2 (Amendment)	Vesting Conditions and Cancellations2
HKFRS 3 (Revised)	Business Combinations3
HKFRS 8	Operating Segments2
HK(IFRIC)-Int 13	Customer Loyalty Programmes4
HK(IFRIC)-Int 15	Agreements for the Construction of Real Estate2
HK(IFRIC)-Int 16	Hedges of a Net Investment in a Foreign Operation5

1 Effective for annual periods beginning on or after 1 January 2009 except the amendments to HKFRS 5, effective for annual periods beginning on or after 1 July 2009

2 Effective for annual periods beginning on or after 1 January 2009

3 Effective for annual periods beginning on or after 1 July 2009

4 Effective for annual periods beginning on or after 1 July 2008

5 Effective for annual periods beginning on or after 1 October 2008

The adoption of HKFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. HKAS 27 (Revised) will affect the accounting treatment for changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control, which will be accounted for as equity transactions. The directors of the Company anticipate that the application of the other new or revised standards, amendments or interpretation will have no material impact on the results and the financial position of the Group.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

3. SEGMENT INFORMATION

For management purposes, the Group’s operations are currently organised into seven operating divisions, namely management contracting, property development management, port and infrastructure development and logistics, LPG distribution, treasury investment, property investment and property trading. These divisions form the basis on which the Group reports its primary segment information.

During the period ended 30 September 2007, the Group’s operations were organised into six segments, namely management contracting, property development management, port and infrastructure development and logistics, LPG distribution, treasury investment and property investment. The prior period results for property trading segment that is presented for comparative purposes has been restated from unallocated results to property trading segment to reflect this internally reporting segment as a separate segment. The property trading segment is engaged in trading of formed land and real estate properties which are held for sale in the ordinary course of business.

Business segment information for the six months ended 30 September 2008 is presented below:

Management contracting HK$’000 TURNOVER External sales 2,479,495 Inter-segment sales – Total 2,479,495 RESULTS Segment results 42,874 Unallocated expenses Interest income Finance costs Decrease in fair value of investments held for trading Share of results of associates 6 Share of results of jointly controlled entities 23 Profit before taxation Taxation Profit for the period	Port and Property infrastructure development development management and logistics HK$’000 HK$’000 19,320 53,239 1,902 740 21,222 53,979 (2,578) 4,981 (161) 24,013 – –	LPG distribution HK$’000 220,703 – 220,703 10,079 – –	Treasury investment HK$’000 15,553 – 15,553 16,444 – –	Property investment HK$’000 1,608 – 1,608 319,810 (4) –	Property trading HK$’000 – – – (3,710) – –	Eliminations Consolidated HK$’000 HK$’000 – 2,789,918 (2,642) – (2,642) 2,789,918 – 387,900 (75,053) 17,483 (38,343) (35,783) – 23,854 – 23 280,081 (152,233) 127,848	Eliminations Consolidated HK$’000 HK$’000 – 2,789,918 (2,642) – (2,642) 2,789,918 – 387,900 (75,053) 17,483 (38,343) (35,783) – 23,854 – 23 280,081 (152,233) 127,848
							2,789,918

							387,900 (75,053) 17,483 (38,343) (35,783) 23,854 23
							280,081 (152,233)
							127,848

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Business segment information for the six months ended 30 September 2007 is presented below:

Management contracting HK$’000 TURNOVER External sales 2,187,617 Inter-segment sales – Total 2,187,617 RESULTS Segment results 44,255 Unallocated expenses Interest income Finance costs Increase in fair value of investments held for trading Gain from fair value changes in respect of derivative financial instruments – Gain on disposal of interest in an associate 3,459 Share of results of associates 20 Share of results of jointly controlled entities 28 Profit before taxation Taxation Profit for the period	Port and Property infrastructure development development management and logistics HK$’000 HK$’000 26,181 31,425 2,751 1,194 28,932 32,619 4,546 (6,668) – – – – 83 19,139 – –	LPG distribution HK$’000 154,156 – 154,156 (3,095) – – – –	Treasury investment HK$’000 32,283 – 32,283 30,966 – – – –	Property investment HK$’000 – – – 629,161 10,331 – 16,099 –	Property trading HK$’000 – – – (110) – – – –	Eliminations Consolidated HK$’000 HK$’000 – 2,431,662 (3,945) – (3,945) 2,431,662 – 699,055 (61,070) 27,285 (23,630) 5,065 – 10,331 – 3,459 – 35,341 – 28 695,864 (268,827) 427,037	Eliminations Consolidated HK$’000 HK$’000 – 2,431,662 (3,945) – (3,945) 2,431,662 – 699,055 (61,070) 27,285 (23,630) 5,065 – 10,331 – 3,459 – 35,341 – 28 695,864 (268,827) 427,037
							2,431,662

							699,055 (61,070) 27,285 (23,630) 5,065 10,331 3,459 35,341 28
							695,864 (268,827)
							427,037

Inter-segment sales are charged at market price or, where no market price is available, at terms determined and agreed by both parties.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

4. OTHER INCOME

The following items are included in other income:

	Unaudited
	Six months
	ended 30 September
	2008	2007
	HK$’000	HK$’000
Interest income	17,483	27,285
Government grant	13,590	–
Exchange gain	6,953	–
Gain from fair value changes in respect of
derivative financial instruments	–	10,331
Increase in fair value of investments held for trading	–	5,065

The Group received a cash government grant of approximately HK$13,590,000 (2007: Nil) as a compensation to LPG sold by the Group at regulated prices during the period ended 30 September 2008. There are no unfilled conditions or other contingencies attached to the receipt of this government grant. There is no assurance that the Group will continue to receive such grant in the future.

5. PROFIT BEFORE TAXATION

Profit before taxation has been arrived at after charging: Amortisation of intangible assets Cost of construction works recognised as an expense Cost of inventories recognised as an expense Decrease in fair value of investments held for trading (included in other expenses) Depreciation of property, plant and equipment Amount provided for the period Less: Amount capitalised in respect of contracts in progress Amount capitalised in respect of project under development Amount capitalised in respect of properties under development/stock of properties Impairment loss on an available-for-sale investment Impairment loss on receivables Release of prepaid lease payments	Unaudited Six months ended 30 September 2008 2007 HK$’000 HK$’000 784 690 2,397,046 2,109,799 208,511 144,889 35,783 – 36,593 35,435 (1,088) (949) (633) (826) (359) (160) 34,513 33,500 – 1,389 – 10,100 903 897	Unaudited Six months ended 30 September 2008 2007 HK$’000 HK$’000 784 690 2,397,046 2,109,799 208,511 144,889 35,783 – 36,593 35,435 (1,088) (949) (633) (826) (359) (160) 34,513 33,500 – 1,389 – 10,100 903 897
		33,500 1,389 10,100 897

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

6. TAXATION

The charge comprises: Current taxation in jurisdictions outside Hong Kong Deferred taxation_(Note 17)_ Land Appreciation Tax (“LAT”) Others Taxation attributable to the Company and its subsidiaries	Unaudited Six months ended 30 September 2008 2007 HK$’000 HK$’000 8,739 6,370 84,188 138,472 59,306 123,985 143,494 262,457 152,233 268,827	Unaudited Six months ended 30 September 2008 2007 HK$’000 HK$’000 8,739 6,370 84,188 138,472 59,306 123,985 143,494 262,457 152,233 268,827
		138,472 123,985
		262,457
		268,827

No tax is payable on the profit for both periods arising in Hong Kong since the assessable profit is wholly absorbed by tax losses brought forward.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

According to the requirements of the Provisional Regulations of the People’s Republic of China (“the PRC”) on LAT (中華人民共和國土地增值稅暫行條例) effective from 1 January 1994, and the Detailed Implementation Rules on the Provisional Regulations of the PRC on LAT (中華人民共和國土地增值稅暫行條例實施細則) effective from 27 January 1995, all income from the sale or transfer of land use rights, buildings and their attached facilities in the PRC is subject to LAT at progressive rates ranging from 30% to 60% of the appreciation value.

7. DISTRIBUTION

	Unaudited
	Six months
	ended 30 September
	2008	2007
	HK$’000	HK$’000
Dividends recognised as distributions to equity holders of
the Company during the current period:
Final dividend for the year ended 31 March 2008 – HK0.85 cent
(2007: HK1.5 cents for the year ended 31 March 2007) per share	12,833	22,467

The final dividend for the year ended 31 March 2008 was distributed in the form of warrants issued on the basis of one warrant for every six existing shares held by shareholders whose names appear on the register of members of the Company on 18 September 2008. Each warrant will entitle shareholders of the Company to subscribe for one new share at an initial subscription price of HK$1.0 per share in cash, subject to anti-dilutive adjustments, at any time between the date of issue of the warrants on 26 September 2008 and the day immediately preceding the anniversary of the date of issue on 25 September 2009, both days inclusive. The fair value of each warrant issued was determined based on a valuation as at the date of approval of the issue of the warrants (5 September 2008) performed by RHL Appraisal Ltd., an independent qualified professional valuer not connected with the Group.

The directors do not recommend the payment of an interim dividend for the six months ended 30 September 2008. For the six months ended 30 September 2007, an interim dividend of HK1.5 cents per share amounting to approximately HK$22,586,000 was declared.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

8. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share for the period is based on the following data:

Earnings attributable to equity holders of the Company for the purpose of basic earnings per share Effect of dilutive potential ordinary shares: Interest on convertible notes Earnings attributable to equity holders of the Company for the purpose of diluted earnings per share Weighted average number of ordinary shares for the purpose of basic earnings per share Effect of dilutive potential ordinary shares: Share options Convertible notes Weighted average number of ordinary shares for the purpose of diluted earnings per share	Unaudited Six months ended 30 September 2008 2007 HK$’000 HK$’000 74,063 312,160 – 3,518 74,063 315,678 2008 2007 Number Number of shares of shares 1,507,974,391 1,492,852,828 1,115,237 19,822,690 – 25,216,275 1,509,089,628 1,537,891,793	Unaudited Six months ended 30 September 2008 2007 HK$’000 HK$’000 74,063 312,160 – 3,518 74,063 315,678 2008 2007 Number Number of shares of shares 1,507,974,391 1,492,852,828 1,115,237 19,822,690 – 25,216,275 1,509,089,628 1,537,891,793
		315,678

		2007 Number of shares 1,492,852,828 19,822,690 25,216,275
		1,537,891,793

The potential ordinary shares attributable to the convertible notes have anti-dilutive effect for the current period.

9. INVESTMENT PROPERTIES

Certain investment properties are held for rental purposes under operating leases.

During the period, the Group completed the reclamation of certain sea area and obtained the certificate of completion of land reclamation (the “Certificate”) in respect of certain land area (the “Formed Land”) in Jiangsu Province, the PRC. Such Formed Land, the future use of which is currently undetermined, has been recognised as investment properties upon obtaining the Certificate. The relevant costs, which include the cost of sea use rights, development expenditure, borrowing costs capitalised and other directly attributable expenses, amounting to HK$100,134,000 (31.3.2008: HK$378,551,000), have been reclassified from project under development.

In respect of the land for which the Group has obtained a certificate from the local land bureau for the Formed Land, once the future use of the land is determined, the Group will apply for the appropriate land use right certificates of the Formed Land. The directors of the Company consider that there is no material impediment to obtain those land use rights certificates for the Group.

The fair value of the Group’s investment properties at 30 September 2008 has been arrived at on the basis of a valuation carried out as at that date by Greater China Appraisal Limited, an independent qualified professional valuer not connected with the Group. In determining the fair value of the investment properties, the comparison method is adopted where comparison based on prices information of recent transacted prices of comparable property is made. Comparable property of similar size, character and location are analysed in order to arrive at a fair comparison of capital values. The gain from fair value adjustment amounted to HK$319,572,000 (2007: HK$628,449,000) and had been recognised in the profit or loss during the current period.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Deferred tax consequences in respect of the revalued investment properties are assessed on the basis that reflects the tax consequences that would follow from the manner in which the Group expects to recover the carrying amounts of the property at each balance sheet date. For Formed Land held for undetermined future use located in the PRC, management of the Company, for the purpose of deferred tax calculation, has made a best estimate that half of the Formed Land will be realised through sale in the long term. The temporary difference of the relevant position between the tax base of the revalued investment properties and their carrying amounts therefore would be subject to PRC LAT in addition to enterprise income tax.

The investment properties of the Group are under medium-term leasehold land in the PRC.

10. MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT

During the period, the additions of the Group’s property, plant and equipment amounted to approximately HK$12,224,000 (2007: HK$152,303,000). Depreciation is provided to write off the cost of property, plant and equipment over their estimated useful lives, which ranged from 3 years to 49 years, after taking into account of their estimated residual value, using straight-line method.

For the prior period, assets additions were mainly represented the port facilities transferred from project under development.

11. PROJECT UNDER DEVELOPMENT

Sea use rights Development costs	Unaudited 30.9.2008 HK$’000 1,534,002 2,085,169 3,619,171	Audited 31.3.2008 HK$’000 1,631,465 1,649,574
		3,281,039

The amount mainly relates to a development project located in Jiangsu Province, the PRC. The Group is undergoing the reclamation of certain area of the sea and the construction of bridge and ports. According to the sea use right certificates, the sea use rights are granted for terms ranging from 49 to 50 years commencing 2004.

12. INTERESTS IN ASSOCIATES

Cost of unlisted investment in associates, less impairment_(Note)_ Share of post-acquisition profits and reserves, net of dividends received	Unaudited 30.9.2008 HK$’000 494,343 294,259 788,602	Audited 31.3.2008 HK$’000 499,343 244,870
		744,213

Note: As at 30 September 2008, the unlisted investment includes the Group’s 45% equity interest in Nantong Port Group Limited (“Nantong Port Group”), which is a sino-foreign joint venture enterprise registered in the PRC. Nantong Port Group is principally engaged in providing cargo loading and off loading, storage, shipping agent, cargo agent, ship anchoring, ship repairing, port machinery, shipping logistics and ship piloting services in Nantong Port, Jiangsu Province, the PRC.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

13. STOCK OF PROPERTIES

Certain real estate properties of approximately HK$438,943,000 (31.3.2008: HK$173,626,000) are properties under development held for sale in the ordinary course of business. The relevant costs include acquisition costs, development expenditure, borrowing costs capitalised and other direct costs attributable to such properties.

During the period, the Group completed the reclamation of certain sea area and obtained the Certificate in respect of Formed Land. Those pieces of Formed Land are held for sale in the ordinary course of business and have been classified as stock of properties upon obtaining the Certificate. The relevant costs, which include the cost of sea use rights, development expenditure, borrowing costs capitalised and other directly attributable costs, amounting to approximately HK$101,874,000 (31.3.2008: Nil), have been reclassified from project under development.

Stock of properties is stated at the lower of cost and net realisable value. Net realisable value is determined by reference to sale proceeds received after the balance sheet date less selling expenses, or by management estimates based on prevailing market condition.

14. DEBTORS, DEPOSITS AND PREPAYMENTS

The Group’s credit terms for its management contracting segment are negotiated at terms determined and agreed with its customers. Credit terms for property leasing business is payable according to the agreements and the credit terms granted by the Group to other debtors normally range from 30 days to 90 days.

Included in debtors, deposits and prepayments are debtors of approximately HK$803,963,000 (31.3.2008: HK$882,254,000) and their aged analysis is as follows:

Within 90 days More than 90 days and within 180 days More than 180 days	Unaudited 30.9.2008 HK$’000 646,156 3,786 154,021 803,963	Audited 31.3.2008 HK$’000 807,265 16,366 58,623
		882,254

15. CREDITORS AND ACCRUED EXPENSES

Included in creditors and accrued expenses are creditors of approximately HK$412,371,000 (31.3.2008: HK$471,022,000) and their aged analysis is as follows:

Within 90 days More than 90 days and within 180 days More than 180 days	Unaudited 30.9.2008 HK$’000 395,928 835 15,608 412,371	Audited 31.3.2008 HK$’000 450,612 7,379 13,031
		471,022

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

16. MOVEMENTS IN BANK AND OTHER BORROWINGS

During the period, the Group raised new bank and other borrowings of approximately HK$928,401,000 (2007: HK$796,397,000) and repaid approximately HK$531,457,000 (2007: HK$449,569,000). As at 30 September 2008, the bank and other borrowings represented balance repayable within one year or on demand of approximately HK$997,638,000 (31.3.2008: HK$839,410,000), and balance repayable after one year of approximately HK$1,240,069,000 (31.3.2008: HK$966,198,000). The secured bank and other borrowings as at 30 September 2008 were approximately HK$1,568,864,000 (31.3.2008: HK$1,225,901,000).

17. DEFERRED TAX LIABILITIES

The following are the major deferred tax liabilities recognised and movements thereon during the current period:

o At 1 April 2008 (audited) Exchange realignment Transfer Charge (credit) to income statement At 30 September 2008 (unaudited)	Fair value adjustment n investment properties HK$’000 422,754 13,035 36,294 143,936 616,019	Fair value adjustment on project under development HK$’000 883,851 25,196 (36,294) – 872,753	Others HK$’000 22,755 645 – (442) 22,958	Total HK$’000 1,329,360 38,876 – 143,494
				1,511,730

18. SHARE CAPITAL

Ordinary shares of HK$0.10 each: Authorised: At 1 April 2008 and 30 September 2008 Issued and fully paid: At 1 April 2008 Issue of shares under share option scheme At 30 September 2008	Number of shares 3,000,000,000 1,507,093,517 1,300,000 1,508,393,517	Value HK$’000 300,000

		150,709 130
		150,839

During the period, the Company granted 85,684,000 share options to the directors and employees at an exercise price ranging from HK$2.00 to HK$3.00. The fair value of the share options granted during the period using the Black-Scholes Option Pricing Model is approximately HK$15,942,000. The share options granted are subject to vesting period from zero to two years with or without certain performance conditions.

As a result of the warrants issued relating to the distribution of final dividend for the year ended 31 March 2008 as set out in note 7, on 19 September 2008, the Company adjusted the exercise price of the outstanding share options by reducing it by a factor of 6/7 and adjusted the number of shares to be issued upon exercise of the share options by increasing it by a factor of 7/6.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

19. ACQUISITION OF ASSETS THROUGH ACQUISITION OF SUBSIDIARIES

On 9 September 2008, the Group was granted an option by the other shareholder of Feeder Port Holdings Limited (“Feeder Port”), which is engaged in logistic network solution, to increase its interest in Feeder Port from 50% to 87.5% at a consideration of HK$15,000,000. The Group exercised the above option on 17 September 2008 and the consideration was satisfied by converting its loan receivable into equity interests in Feeder Port. The acquisition has been accounted for as an acquisition of assets and liabilities. The net assets acquired in the transaction was summarised as follows:

Net assets acquired: Property, plant and equipment Prepaid lease payments Project under development Debtors, deposits and prepayments Bank balances and cash Creditors and accrued expenses Less: Minority interest Total consideration satisfied by: Interests in associates Amounts due from associates Derivative financial instrument (fair value of option) Net cash inflow arising on acquisition: Bank balances and cash acquired	2008 HK$’000 494 143,976 20,758 15,063 6,168 (122,748)
	63,711 (4,604)
	59,107

	7,302 15,000 36,805
	59,107

	6,168

20. CONTINGENCIES AND COMMITMENTS

Commitments Expenditure contracted for but not provided in the condensed consolidated financial statements in respect of acquisition of: – Property, plant and equipment – Project under development – Properties under development – Equity investments Contingencies Guarantee given to a bank in respect of banking facilities granted to an associate	Unaudited 30.9.2008 HK$’000 294,236 228,414 33,756 169,772 726,178 11,835	Audited 31.3.2008 HK$’000 279,066 449,536 425,995 –
		1,154,597

		10,481

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

21. SIGNIFICANT RELATED PARTY TRANSACTIONS

(a) The Group entered into the following significant transactions with its related parties during the period:

		Unaudited
		Six months
		ended 30 September
Class of related party	Nature of transactions	2008	2007
		HK$’000	HK$’000
Associates of the Group	Interest income charged by the Group	–	1,170
	Rentals and related building management
	fee charged to the Group	–	5,776
	Project management fees charged
	by the Group	12,964	15,570
Jointly controlled entities of the Group	Subcontracting fees charged to the Group	–	3,861
Subsidiaries of ITC Corporation	Interest income charged by the Group	–	1,922
Limited (“ITC”)	Interest charged to the Group	2,544	–
Associates of ITC_(Note)_	Interest income charged by the Group	13,820	5,825
	Interest charged to the Group	1,817	–
	Construction works charged by the Group	5,412	–

Note: ITC is the substantial shareholder of the Company, which Dr Chan Kwok Keung, Charles, was, in turn, the substantial shareholder of ITC and director of the Company. He has significant influence over these related parties.

(b) Compensation of key management personnel

The remuneration of directors and other members of key management, which is determined by the remuneration committee having regard to the performance of individuals and market trends, is as follows:

Short-term benefits Post-employment benefits Share-based payment expense	Unaudited Six months ended 30 September 2008 2007 HK$’000 HK$’000 11,323 10,527 243 278 6,777 5,906 18,343 16,711	Unaudited Six months ended 30 September 2008 2007 HK$’000 HK$’000 11,323 10,527 243 278 6,777 5,906 18,343 16,711
		16,711

22. COMPARATIVE INFORMATION

During the year ended 31 March 2008, the Group changed its presentation of revenue and cost of sales in the condensed consolidated income statement in respect of its investments in securities for the current and prior periods. The net gain on investments held for trading is now included in other income instead of separately disclosed in revenue and cost of sales. The comparatives have been restated accordingly such that the net loss and net gain on investments in securities for the current and prior periods are grouped under other expenses and other income respectively.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

3. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE PYI GROUP FOR THE YEAR ENDED 31 MARCH 2008

Set out below is the audited consolidated financial statements of PYI Group for the financial years ended 31 March 2007 and 31 March 2008 together with the relevant notes to the accounts, as extracted from the annual report of PYI for the year ended 31 March 2008.

Consolidated Income Statement

For the year ended 31 March 2008

Notes Turnover 7 Cost of sales Gross profit Other income 9 Administrative expenses Distribution costs Other expenses 10 Finance costs 11 Gain on disposal of interest in an associate Discount on acquisition of business 46(a) Gain from fair value adjustments in respect of investment properties 18 Share of results of associates Share of results of jointly controlled entities Profit before taxation 13 Taxation (charge) credit 14 Profit for the year Attributable to: Equity holders of the Company Minority interests Distribution 15 Earnings per share 16 Basic Diluted	2008 HK$’000 5,502,543 (5,075,383) 427,160 80,865 (291,246) (44,622) (14,916) (53,252) 3,459 – 669,460 56,330 59 833,297 (315,186) 518,111 359,982 158,129 518,111 45,053 HK$ 0.240 0.238	2007 HK$’000 (restated) 4,643,712 (4,370,170) 273,542 171,396 (238,936) (18,471) (69,068) (23,597) 5,067 3,755 – 223,549 (642) 326,595 50,552 377,147 345,665 31,482 377,147 369,668 HK$ 0.236 0.233

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Consolidated Balance Sheet

At 31 March 2008

Notes NON-CURRENT ASSETS Property, plant and equipment 17 Investment properties 18 Project under development 19 Properties under development 20 Prepaid lease payments 21 Goodwill 22 Other intangible assets 23 Interests in associates 24 Interests in jointly controlled entities 25 Available-for-sale investments 26 Loans receivable – due after one year 27 Deferred consideration receivable 30 CURRENT ASSETS Properties under development 20 Prepaid lease payments 21 Inventories Loans receivable – due within one year 27 Amounts due from related companies 28 Amounts due from associates 29 Amounts due from customers for contract works 31 Debtors, deposits and prepayments 32 Conversion option embedded in loan receivable 33 Investments held for trading 34 Available-for-sale investments 26 Derivative financial instruments 35 Taxation recoverable Pledged bank deposits 36 Short term bank deposits 36 Bank balances and cash 36	2008 HK$’000 718,611 1,230,351 3,281,039 172,031 78,770 63,969 61,402 744,213 1,987 1,081 32,222 2,863 6,388,539 173,626 2,343 20,171 18,000 296,753 59,777 201,589 2,421,568 94 61,255 56,635 22,174 3,261 34,269 438,878 162,541 3,972,934	2007 HK$’000 528,203 – 2,411,680 44,458 67,968 61,646 55,775 710,234 1,928 1,312 30,956 6,597
		3,920,757
		82,732 1,766 23,425 181,508 150,099 187,314 223,637 1,910,690 1,427 155,783 – – 2,942 42,601 441,769 294,997
		3,700,690

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Notes CURRENT LIABILITIES Amounts due to customers for contract works 31 Creditors and accrued expenses 37 Amounts due to associates 38 Amounts due to minority shareholders 39 Amounts due to related companies 40 Taxation payable Bank and other borrowings – due within one year 41 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bank and other borrowings – due after one year 41 Convertible notes payable 42 Deferred consideration payable 46(a) Deferred tax liabilities 43 CAPITAL AND RESERVES Share capital 44 Reserves Equity attributable to equity holders of the Company Share-based payment reserve of a subsidiary Minority interests TOTAL EQUITY	2008 HK$’000 804,442 1,903,832 50,291 1,041 133,051 103,987 839,410 3,836,054 136,880 6,525,419 966,198 120,551 – 1,329,360 2,416,109 4,109,310 150,709 3,226,376 3,377,085 5,280 726,945 4,109,310	2007 HK$’000 1,038,548 1,157,990 17,429 4,071 – 61,286 597,386
		2,876,710
		823,980
		4,744,737
		426,751 – 121,213 947,924
		1,495,888
		3,248,849

		149,171 2,622,681
		2,771,852 981 476,016
		3,248,849

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Consolidated Statement of Changes in Equity

For the year ended 31 March 2008

			Attri	butable to the equity holders	butable to the equity holders	of the Company	of the Company			Total HK$’000 3,009,937
Share capital HK$’000 137,880 – – – – – – – – – (200) – 3,657 – – 984 6,850 – – – – – – – 149,171	Share premium HK$’000 169,129 – – – – – – – – – (4,181) – 59,597 – – (984) 192,701 – (635) – – – – – 415,627	Special reserve HK$’000 124,695 – – – – – – – – – – – – – – – – – – – – – – – 124,695	Capital reserve HK$’000 (201,291) – – – – – – – – – – – – – – – – – – – – – – (142,035) (343,326)	Investment revaluation reserve HK$’000 (352) – (238) – – (238) – – (238) – – – – – – – – – – – – – – – (590)	Other reserve HK$’000 5,733 – – – 2,019 2,019 – (2,991) (972) 33 – – – – – – – – – – – – – – 4,794	Translation reserve HK$’000 5,143 54,168 – 15,167 – 69,335 – (218) 69,117 – – – – – – – – – – – – – – – 74,260	Convertible notes reserve HK$’000 – – – – – – – – – – – – – – – – – – – – – – – – –	Share- based payment reserve HK$’000 4,940 – – – – – – – – – – 22,181 (5,096) (63) – – – – – – – – – – 21,962	Retained profits HK$’000 2,324,755 – – – – – 345,665 – 345,665 (33) – – – 63 – – – 24,477 – (369,668) – – – – 2,325,259
										81,968 (341) 15,167 2,019
										98,813 377,147 (3,209)
										472,751
										– (4,381) 23,269 58,158 – 1,500 – 199,551 24,477 (635) (369,668) (17,547) 48,761 5,472 (202,796)
										3,248,849

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

			Attri	butable to the	equity holders	of the Company	of the Company			Total HK$’000 3,248,849
Share capital HK$’000 149,171 – – – – – – – – – – – (183) – 1,062 – – 659 – – – – – – – 150,709	Share premium HK$’000 415,627 – – – – – – – – – – – (5,954) – 30,088 – – (659) – (388) – – – – – 438,714	Special reserve HK$’000 124,695 – – – – – – – – – – – – – – – – – – – – – – – – 124,695	Capital reserve HK$’000 (343,326) – – – – – – – – – – – – – – – – – – – – – – – – (343,326)	Investment revaluation reserve HK$’000 (590) – 490 – 490 – 809 – – 1,299 – – – – – – – – – – – – – – – 709	Other reserve HK$’000 4,794 – – – – – – – (2,743) (2,743) 40 8,547 – – – – – – – – – – – – – 10,638	Translation reserve HK$’000 74,260 159,028 – 61,730 220,758 – – 644 (200) 221,202 – – – – – – – – – – – – – – – 295,462	Convertible notes reserve HK$’000 – – – – – – – – – – – – – – – – – – – – – – 8,482 – – 8,482	Share- based payment reserve HK$’000 21,962 – – – – – – – – – – – – 15,478 (5,095) (4,085) – – – – – – – – – 28,260	Retained profits HK$’000 2,325,259 – – – – 359,982 – – – 359,982 (40) – – – – 4,085 – – 18,509 – (45,053) – – – – 2,662,742
										199,020 349 61,730
										261,099 518,111 809 1,023 (2,943)
										778,099
										– 8,547 (6,137) 20,175 26,055 – 2,836 – 18,509 (388) (45,053) (22,119) 8,482 65,722 5,733
										4,109,310

The special reserve of the Group represents the difference between the nominal amount of the share capital and share premium of the subsidiaries at the date on which they were acquired by the Group and the nominal amount of the share capital issued as consideration for the acquisition.

The capital reserve represents the difference between the fair value and the carrying amount in the underlying assets and liabilities that attributable to the additional interests in subsidiaries acquired by the Group.

The other reserve represents the share of statutory reserve of the associate of the Group in the People’s Republic of China and the share of contribution from associate’s shareholders.

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Consolidated Cash Flow Statement

For the year ended 31 March 2008

OPERATING ACTIVITIES Profit before taxation Adjustments for: Finance costs Loss on disposal of property, plant and equipment Release of reserves upon disposal of investment held for trading Gain on disposal of interest in an associate Share of results of associates Share of results of jointly controlled entities Release of prepaid lease payments Amortisation of intangible assets Depreciation of property, plant and equipment Decrease (increase) in fair value of investments held for trading Decrease in fair value of conversion option embedded in loan receivable Increase in fair value of derivative financial instruments Gain from fair value adjustments in respect of investment properties Share-based payment expense Interest income Impairment loss on receivables Impairment loss on an available-for-sale investment Reversal of impairment loss on receivables Discount on acquisition of business Operating cash flows before movements in working capital (Increase) decrease in amounts due from (to) customers for contract works, net of attributable interest expenses and depreciation Decrease in properties held for sale Increase in properties under development Decrease (increase) in loans receivable Decrease (increase) in inventories Increase in debtors, deposits and prepayments (Increase) decrease in amounts due from related companies Decrease in amounts due from associates Decrease in investments held for trading Increase in creditors and accrued expenses Increase in amounts due to associates Increase in amounts due to related companies Cash generated from operations Hong Kong Profits Tax paid Hong Kong Profits Tax refunded Overseas tax paid NET CASH FROM OPERATING ACTIVITIES	2008 HK$’000 833,297 53,252 118 (2,943) (3,459) (56,330) (59) 1,958 1,334 65,348 9,508 1,333 (11,086) (669,460) 19,867 (46,577) 2,686 1,389 – – 200,176 (209,435) – (85,806) 148,395 3,254 (382,297) (134,931) 127,845 85,020 471,226 32,862 13,051 269,360 (593) 21 (5,822) 262,966	2007 HK$’000 (restated) 326,595 23,597 977 – (5,067) (223,549) 642 1,031 490 21,779 (89,472) 1,650 – – 23,083 (42,444) 18,628 – (30,324) (3,755) 23,861 553,472 78,245 (82,732) (72,759) (23,425) (511,224) 115,017 167,848 88,633 237,139 13,751 – 587,826 (3,296) – (892) 583,638

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Notes INVESTING ACTIVITIES Increase in project under development Payment of deferred consideration payable Increase in properties under development Additions to available-for-sale investments Acquisition of assets through acquisition of subsidiaries 47 Additions to property, plant and equipment Additions to derivative financial instruments Additions to prepaid lease payments Additions to other intangible assets Acquisition of subsidiaries 46 Dividend received from associates Interest received Proceeds from disposal of interest in an associate Decrease in pledged bank deposits Proceeds from disposal of property, plant and equipment Acquisition of interests in associates Acquisition of additional interests in subsidiaries Repayment of deferred consideration receivable Proceeds from disposal of other intangible assets NET CASH USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES New bank and other borrowings raised Loan from a related company Contribution from minority shareholders Proceeds from issue of shares Proceeds from issue of shares of a subsidiary Repayment of bank and other borrowings Interest paid Dividends paid to equity holders of the Company Dividends paid to minority shareholders of subsidiaries Share repurchase Repayment of amounts due to minority shareholders Share issue expenses Loan repaid to a minority shareholder NET CASH FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS BROUGHT FORWARD CASH AND CASH EQUIVALENTS CARRIED FORWARD ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Short term bank deposits Bank balances and cash Bank overdrafts	2008 HK$’000 (912,607) (111,111) (86,966) (56,635) (46,119) (44,838) (11,088) (8,869) (2,366) (1,792) 88,250 45,045 8,860 8,332 660 – – – – (1,131,244) 1,583,135 70,000 65,722 26,055 2,836 (837,236) (109,130) (26,544) (16,386) (6,137) (3,030) (388) – 748,897 (119,381) 4,466 716,334 601,419 438,878 162,541 – 601,419	2007 HK$’000 (restated) (290,888) – (43,264) – – (50,077) – (383) – (369,262) 4,790 42,070 26,055 76,021 1,973 (278,520) (7,800) 4,000 115 (885,170) 1,198,106 – 50,261 58,158 – (850,715) (39,808) (19,531) (12,075) (4,381) (3,597) (635) (31,821) 343,962 42,430 7,866 666,038 716,334 441,769 294,997 (20,432) 716,334

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Notes to the Consolidated Financial Statements

For the year ended 31 March 2008

1. GENERAL

The Company is an exempted company incorporated in Bermuda with limited liability. Its shares are listed on The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”). The addresses of the registered office and its principal place of business of the Company are disclosed in the “Corporate Information” section to the annual report.

The consolidated financial statements are presented in Hong Kong dollars, which is the same as the functional currency of the Company.

The Company is an investment holding company. The activities of its principal subsidiaries, associates and jointly controlled entities are set out in note 56.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

In the current year, the Group has applied, for the first time, the following new standard, amendment and interpretations (“new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), which are effective for the Group’s financial year beginning on 1 April 2007.

Hong Kong Accounting Standard (“HKAS”) 1 Capital Disclosures (Amendment) HKFRS 7 Financial Instruments: Disclosures Hong Kong (IFRIC) – Interpretation Scope of HKFRS 2 (“HK(IFRIC) – Int”) 8 HK(IFRIC) – Int 9 Reassessment of Embedded Derivatives HK(IFRIC) – Int 10 Interim Financial Reporting and Impairment HK(IFRIC) – Int 11 HKFRS 2 – Group and Treasury Share Transactions

The Group has applied the disclosure requirements under HKAS 1 (Amendment) and HKFRS 7 retrospectively. Certain information presented in prior year under the requirement of HKAS 32 has been removed and the relevant comparative information based on the requirements of HKAS 1 (Amendment) and HKFRS 7 has been presented for the first time in the current year.

Other than as disclosed above, the adoption of the new HKFRSs had no material effect on how the results and financial position for the current or prior accounting periods have been prepared and presented. Accordingly, no prior period adjustment has been required.

The Group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

HKAS 1 (Revised) Presentation of Financial Statements[1] HKAS 23 (Revised) Borrowing Costs[1] HKAS 27 (Revised) Consolidated and Separate Financial Statements[2] HKAS 32 & 1 (Amendments) Puttable Financial Instruments and Obligations Arising on Liquidation[1] HKFRS 2 (Amendment) Vesting Conditions and Cancellations[1] HKFRS 3 (Revised) Business Combinations[2] HKFRS 8 Operating Segments[1] HK(IFRIC) – Int 12 Service Concession Arrangements[3] HK(IFRIC) – Int 13 Customer Loyalty Programmes[4] HK(IFRIC) – Int 14 HKAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction[3]

1 Effective for annual periods beginning on or after 1 January 2009 2 Effective for annual periods beginning on or after 1 July 2009 3 Effective for annual periods beginning on or after 1 January 2008 4 Effective for annual periods beginning on or after 1 July 2008

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

The adoption of HKFRS 3 (Revised) “Business Combinations” may affect the accounting for business combination for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. HKAS 27 (Revised) “Consolidated and Separate Financial Statements” will affect the accounting treatment for changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control, which will be accounted for as equity transactions. The application of these revised standards may affect the Group’s results and financial position.

Other than as disclosed above, the directors of the Company anticipate that the application of the other new or revised standards, amendments and interpretations will have no material impact on the results and the financial position of the Group.

3. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments and investment properties which are measured at fair values, as explained in the accounting policies set out below.

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange (“Listing Rules”) and by the Hong Kong Companies Ordinance.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Group’s equity therein. Minority interests in the net assets consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Business combinations

The acquisition of businesses is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under HKFRS 3 “Business Combinations” are recognised at their fair values at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Acquisition of additional interests in subsidiaries

On acquisition of additional interest in a subsidiary, the difference between the fair values and the carrying values of the underlying assets and liabilities attributable to the additional interest in a subsidiary acquired is charged to capital reserve. Goodwill or discount arising on the purchase of the additional interest is calculated as the difference between the additional cost of the interest acquired and the increase in the Group’s interest, based on the fair value of all identifiable assets and liabilities of the subsidiary.

Goodwill

Goodwill arising on acquisitions of a business or an associate represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the relevant business or associate at the date of acquisition. Such goodwill is carried at cost less any identified impairment loss.

For the purposes of impairment testing, goodwill arising from an acquisition of business is allocated to each of the relevant cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the acquisition. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired. For goodwill arising on an acquisition in a financial year, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that financial year. When the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in the consolidated income statement. An impairment loss for goodwill is not reversed in subsequent periods.

Capitalised goodwill arising on acquisition of a business is presented separately in the consolidated balance sheet. Capitalised goodwill arising on acquisition of an associate which is accounted for using the equity method is included in the cost of the investment of the associate and is assessed for impairment as part of the investment.

On subsequent disposal of the relevant cash-generating unit, the attributable amount of goodwill capitalised is included in the determination of the amount of profit or loss on disposal.

Discount on acquisition

A discount on acquisition arising on an acquisition of a business/additional interest in a subsidiary represents the excess of the Group’s interest in the net fair value of an acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the acquisition. Discount on acquisition is recognised immediately in profit or loss.

Property, plant and equipment

Property, plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost of items of property, plant and equipment over their estimated useful lives and after taking into account of their estimated residual value, using the straight line method.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated income statement in the year in which the item is derecognised.

Investment properties

On initial recognition, investment properties are measured at cost, including any directly attributable expenses. Subsequent to initial recognition, investment properties are measured at their fair values using the fair value model.

Gain arising from change in the fair value of investment property is included in profit or loss for the year in which they arise.

The investment properties are derecognised upon disposal or when the investment properties are permanently withdrawn from use or no future economic benefits are expected from their disposals. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement in the year in which the item is derecognised.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Properties under development under current asset

Properties under development under current asset which are held for future sale are stated at the lower of cost and net realisable value. Cost includes the cost of land use rights, development expenditure, borrowing costs capitalised and other direct attributable expenses.

Project under development/properties under development under non-current asset

Properties under development for purpose not yet determined and project under development are carried in the consolidated financial statements at cost less any identified impairment loss. Cost of properties/project under development includes, where appropriate, borrowing cost capitalised. No depreciation has been provided for properties/project under development.

Prepaid lease payments/sea use right

The up-front payments to acquire leasehold interest in land or sea are accounted for as operating leases and are stated at cost and released over the lease term on a straight line basis.

Interests in associates

An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture.

The results and assets and liabilities of associates are incorporated in the consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of net assets of the associates, less any identified impairment loss. When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a group entity transacts with an associate of the Group, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant associate, except to the extent that unrealised losses provide evidence of an impairment of the asset transferred, in which case, the full amount of losses is recognised.

Interests in jointly controlled entities

Joint venture arrangements that involve the establishment of a separate entity in which venturers have joint control over the economic activity of the entity are referred to as jointly controlled entities.

The results and assets and liabilities of jointly controlled entities are incorporated in the consolidated financial statements using the equity method of accounting. Under the equity method, investments in jointly controlled entities are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of net assets of the jointly controlled entities, less any identified impairment loss. When the Group’s share of losses of a jointly controlled entity equals or exceeds its interest in that jointly controlled entity (which includes any long-term interest that, in substance, form part of the Group’s net investment in the jointly controlled entity), the Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that jointly controlled entity.

When a group entity transacts with a jointly controlled entity of the Group, unrealised profits or losses are eliminated to the extent of the Group’s interest in the jointly controlled entity, except to the extent that unrealised losses provide evidence of an impairment of the asset transferred, in which case, the full amount of losses is recognised.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at the acquisition date.

Subsequent to initial recognition, intangible assets with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives. Intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of other intangible assets below).

Other intangible assets

On initial recognition, other intangible assets acquired separately other than from business combinations are recognised at cost. After initial recognition, other intangible assets with indefinite useful lives are carried at cost less any identified impairment loss. Other intangible assets with finite useful lives are amortised on a straight-line basis over its useful lives, and carried at cost less accumulated amortisation and accumulated impairment loss.

Gains or losses arising from derecognition of an intangible asset are measured at the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated income statement when the asset is derecognised.

Other intangible assets with indefinite useful lives are tested for impairment annually by comparing their carrying amounts with their recoverable amounts, irrespective of whether there is any indication that they may be impaired. If the recoverable amount of such intangible assets is estimated to be less than its carrying amount, the carrying amount of the other intangible assets is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

When an impairment loss subsequently reverses, the carrying amount of such intangible assets is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for that other intangible assets in prior years. A reversal of an impairment loss is recognised as income immediately.

Construction contracts

When the outcome of a construction contract can be estimated reliably, contract revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date. Variations in contract work and claims are included to the extent that they have been agreed with the customer.

When the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as expenses in the period in which they are incurred. Variation in contract work and claims are included to the extent that they have been agreed with the customer. Provision is made for foreseeable losses as soon as they are anticipated by management.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Where contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the excess is shown as amount due from a customer for contract work. Where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the excess is shown as amount due to a customer for contract work. Amounts received before the related work is performed are included in the consolidated balance sheet, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customer are included in the consolidated balance sheet under debtors, deposits and prepayments.

Inventories

Inventories, including liquefied petroleum gas (“LPG”) for sales and consumables, are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average cost method. Net realisable value is based on estimated selling prices in the ordinary course of business less the estimated costs necessary to make the sale.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Financial instruments

Financial assets and financial liabilities are recognised on the consolidated balance sheet when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into one of the three categories, including financial assets at fair value through profit or loss (“FVTPL”), loans and receivables and available-for-sale financial assets. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest basis for debt instruments.

Financial assets at fair value through profit or loss (FVTPL)

Financial assets at FVTPL comprise of financial assets held for trading.

A financial asset is classified as held for trading if:

it has been acquired principally for the purpose of selling in the near future;
it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.

At each balance sheet date subsequent to initial recognition, financial assets at FVTPL are measured at fair value, with changes in fair value recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial assets.

Loans and receivables

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at FVTPL, loans and receivables or held-to-maturity investments. At each balance sheet date subsequent to initial recognition, available-for-sale financial assets are measured at fair value. Changes in fair value are recognised in equity, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in equity is removed from equity and recognised in profit or loss (see accounting policy on impairment loss on financial asset below).

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, they are measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition (see accounting policy on impairment loss on financial asset below).

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been impacted.

For an available-for-sale equity investment, a significant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty;
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial asset, such as debtors and loan receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of debtors, loans receivable, amounts due from related companies and amounts due from associates where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted in respect of financial liabilities and equity instruments are set out below.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Interest expense is recognised on an effective interest basis.

Convertible notes payable

Convertible notes payable issued by the Company that contain both liability and equity components are classified separately into respective liability and equity components on initial recognition. Conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is classified as an equity instrument. On initial recognition, the fair value of the liability component is determined using the prevailing market interest rate of similar non-convertible debts. The difference between the gross proceeds of the issue of the convertible notes payable and the fair value assigned to the liability component, representing the conversion option for the holder to convert the notes into equity, is included in convertible notes reserve.

In subsequent periods, the liability component of the convertible notes payable is carried at amortised cost using the effective interest method. The equity component, represented by the option to convert the liability component into ordinary shares of the Company, will remain in convertible notes reserve until the option is exercised in which case the balance stated in convertible notes reserve will be transferred to share premium. Where the option remains unexercised at the expiry date, the balance stated in convertible notes reserve will be released to the retained profits. No gain or loss is recognised in profit or loss upon conversion or expiration of the option.

Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are charged directly to equity. Transaction costs relating to the liability component are included in the carrying amount of the liability portion and amortised over the period of the convertible notes payable using the effective interest method.

Other financial liabilities

Other financial liabilities including creditors, other payables, amounts due to related companies/associates/ minority shareholders, deferred consideration payable, convertible notes payable and bank and other borrowings are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Derivative financial instruments

Derivative financial instruments are initially measured at fair value on the contract date, and are remeasured to fair value at subsequent reporting dates.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are deemed as financial assets/liabilities held for trading and are recognised in profit or loss as they arise.

Derivative embedded in non-derivative host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not carried at fair value with change in fair value recognised in profit or loss.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised directly in equity is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid or payable is recognised in profit or loss.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Impairment losses (other than goodwill and intangible asset with indefinite lives)

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Rental income from operating leases is recognised in the consolidated income statement on a straight-line basis over the term of the relevant lease.

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight-line basis.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold and services provided in the normal course of business, net of discounts and sales related taxes.

Revenue from a construction contract is recognised on the percentage of completion method, measured by reference to the value of work certified during the year.

Property development management service income is recognised when services are provided.

Revenue from distribution of LPG is recognised when goods are delivered and title has passed.

Revenue from sale of completed properties is recognised upon the execution of a binding sales agreement.

Rental income under operating leases is recognised on a straight line basis over the term of the relevant lease.

Dividend income from investments is recognised when the Group’s right to receive payment has been established.

Service income from provision of consultancy services which also involve usage by the customer of the Group’s infrastructure and logistics facilities is recognised at the time when the services are rendered. When the service contract involves a long period to deliver the services, the revenue is recognised by reference to the stage of completion of the contract service, as measured by the proportion that the project cost incurred by the customer up to date bear to the estimated total project costs.

The income from contract involving only the use by customer of the Group’s infrastructure facilities is recognised on a straight-line basis over the period of the usage granted to the customer.

Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets i.e. assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Retirement benefit costs

Payments to defined contribution retirement benefit schemes including Mandatory Provident Fund Scheme are charged as an expense or capitalised in contracts in progress, where appropriate, when employees have rendered service entitling them to the contributions.

Taxation

Taxation represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, associates and jointly controlled entities, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in its functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity, in which cases, the exchange differences are also recognised directly in equity.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Company (i.e. Hong Kong dollars) at the rate of exchange prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised as a separate component of equity (the translation reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation on or after 1 April 2005 are treated as assets and liabilities of that foreign operation and translated at the rate of exchange prevailing at the balance sheet date. Exchange differences arising are recognised in the translation reserve.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Share-based payment transactions

Share options granted to employees after 7 November 2002 and vested before 1 April 2005

The financial impact of share options granted is not recorded in the consolidated financial statements until such time as the options are exercised, and no charge is recognised in the consolidated income statement in respect of the value of options granted. Upon the exercise of the share options, the resulting shares issued are recorded as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded as share premium. Options which lapse or are cancelled prior to their exercise date are deleted from the register of outstanding options.

Share options granted to employees after 7 November 2002 and vested on or after 1 April 2005

For share options granted to directors and employees of the Group after 1 April 2005, the fair value of services received determined by reference to the fair value of share options granted at the grant date is expensed on a straight-line basis over the vesting period/recognised as an expense in full at the grant date when the share options granted vest immediately, with a corresponding increase in equity (share-based payment reserve).

At each balance sheet date, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the estimates during the vesting period, if any, is recognised in profit or loss with a corresponding adjustment to share-based payment reserve. At the time when the share options are exercised, the amount previously recognised in share-based payment reserve will be transferred to share premium. When the share options are forfeited after vesting date or are still not exercised at the expiry date, the amount previously recognised in share-based payment reserve will be transferred to retained profits.

Share options granted to suppliers/consultants

Share options issued in exchange for goods or services are measured at the fair values of the goods or services received, unless that fair value cannot be reliably measured, in which case the goods or services received are measured by reference to the fair value of the share options granted. The fair values of the goods or services received are recognised as expenses immediately, unless the goods or services qualify for recognition as assets. Corresponding credit has been made to share-based payment reserve.

KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in note 3, the directors of the Company are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

(a) Construction contracts

The Group recognises contract revenue and profit on a construction contract according to the management’s estimation of the total outcome of the project as well as the percentage of completion of construction works. Notwithstanding that management of the Group reviews and revises the estimates of both contract revenue and costs for the construction contract as the contract progresses, the actual outcome of the contract in terms of its total revenue and costs may be higher or lower than the estimates and this will affect the revenue and profit recognised.

(b) Deferred tax asset

At 31 March 2008, no deferred tax asset in relation to unused tax losses of HK$917 million has been recognised in the Group’s consolidated balance sheet due to unpredictability of future profit streams on those subsidiaries. In cases where the actual future profits generated by those subsidiaries are more than expected, a material deferred tax credit would be recognised in the consolidated income statement in the period in which the tax losses are utilised.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

(c) Deferred tax liability recognised in respect of fair value adjustments on investment properties and project under development

The measurement of deferred tax liabilities shall reflect the tax consequences that would follow from the manner in which the Group expects, at the balance sheet date, to recover the carrying amount of its assets.

As at 31 March 2008, the deferred tax liability in respect of the fair value adjustment on project under development amounted to approximately HK$883,851,000 (2007: HK$926,204,000), of which, the amount included approximately HK$641,327,000 (2007: HK$672,059,000) as the People’s Republic of China (the “PRC”) Land Appreciation Tax (“LAT”). In making the estimation, the directors have considered that the land and sea use rights development may be recovered through future sale in the long term. Upon the completion of the development and the market condition by that time, the directors will assess the use of property interests and make appropriate adjustments to reflect the tax consequences of the related assets.

As described in note 18, the directors of the Company have made a best estimate on deferred tax liability in considering the manner in which the Group expects to recover the investment properties. In making the estimation, the directors took reference to the use of the property interests nearby and assumptions are made based on the likelihood that the properties may use in that location. The directors had made a best estimate that half of the property interests may be realised through sale in the long term. The LAT had been recognised as deferred tax liability based on the above estimate. The amount of related deferred tax liability as at 31 March 2008 is approximately HK$244,902,000 (2007: Nil).

5. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 41, convertible notes payable and equity attributable to equity holders of the Company, comprising issued share capital and various reserves.

The directors of the Company review the capital structure periodically. As part of this review, the directors consider the cost of capital and their associated risks thereto. The Group will balance its overall capital structure through the payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debt.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

6. FINANCIAL INSTRUMENTS

6a. Categories of financial instruments

Financial assets Fair value through profit or loss (FVTPL) – Investments held for trading – Conversion option embedded in loan receivable – Derivative financial instruments Loans and receivables – Loans receivables – Debtors and other receivables – Amounts due from associates – Amounts due from related companies – Deferred consideration receivable – Bank deposits – Bank balances and cash Available-for-sale financial assets – Available-for-sale investments Total Financial liabilities at amortised costs Creditors and other payables Amounts due to associates Amounts due to related companies Amounts due to minority shareholders Bank and other borrowings Convertible notes payable Deferred consideration payable	2008 HK$’000 61,255 94 22,174 83,523 50,222 2,003,808 59,777 296,753 10,795 473,147 162,541 3,057,043 57,716 3,198,282 1,738,603 50,291 133,051 1,041 1,805,608 120,551 – 3,849,145	2007 HK$’000 155,783 1,427 –
		157,210
		212,464 1,693,034 187,314 150,099 10,529 484,370 294,997
		3,032,807
		1,312
		3,191,329

		1,014,455 17,429 – 4,071 1,024,137 – 121,213
		2,181,305

6b. Financial risk management objectives and policies

The Group’s major financial instruments include bank deposits, bank balances and cash, debtors, loans and other receivables, available-for-sale investments, investments held for trading, derivative financial instruments, creditors and other payables, amounts due from (to) associates/related companies/minority shareholders, bank and other borrowings and convertible notes payable. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner. The Group’s overall strategy remains unchanged from prior year.

(a) Market risk

(i) Interest rate risk

The Group’s exposure to interest rates is mainly attributable to its financial instruments that are subject to variable rate. Those financial instruments expose the Group to cash flow interest rate risk. Details of the Group’s interest bearing financial instruments at variable rate have been disclosed in notes 28, 29, 32, 36, 40 and 41. Financial instruments at fixed rates expose the Group to fair value interest risk. Details of the Group’s interest bearing financial instruments at fixed rate have been disclosed in notes 27, 28 and 41.

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

In order to mitigate the interest rate risk, the Group adopts a policy of maintaining an appropriate mix of fixed and floating rate borrowings which is achieved primarily through entering into different contractual terms of borrowings. The position is regularly monitored and evaluated by reference of anticipated changes in market interest rate.

The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note. The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of the rates announced by the People’s Bank of China arising from the Group’s Renminbi (“RMB”) borrowings at variable rates and Hong Kong Inter-bank Offered Rate (“HIBOR”) and Hong Kong Best Lending Rate (“HKBLR”) arising from the Group’s HK Dollars borrowings at variable rates.

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates for variable rate instruments at the balance sheet date. The analysis is prepared assuming the amount outstanding at the balance sheet date was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the effect to the profit of the Group is insignificant.

(ii)

Currency risk

Foreign currency risk is the risk that the value of a monetary item will fluctuate because of changes in foreign exchange rates. Certain receivables of the Group are denominated in foreign currencies such as Macau Pataca (“MOP”), RMB and United States Dollars (“US Dollars”) and which expose the Group to foreign currency risk. The Group currently does not have a foreign currency hedging policy. However, management monitors foreign currency exposure and will consider hedging significant foreign currency exposure should the need arises.

Majority of the subsidiaries of the Group operates in the Mainland China with most of the transactions denominated in either RMB, HK Dollars or US Dollars. RMB is not freely convertible into other foreign currencies and conversion of RMB into foreign currencies is subject to rules and regulations of foreign exchange control promulgated by the PRC government. Certain subsidiaries of the Company have foreign currency transactions, including contract revenue, purchase of materials, contract costs, expenses and borrowings. The Group manages its exposures to foreign currency transactions by monitoring the level of foreign currency receipts and payments. The Group ensures that the net exposure to foreign exchange risk is kept to an acceptable level from time to time.

All of the Group’s borrowings are denominated in HK Dollars and RMB. It is the policy of the Group to draw borrowings in the functional currencies of the entities as management considers the repayments can be sourced from income to be generated in those currencies.

As HK Dollars is pegged to US Dollars, the Group believes the exposure of transactions denominated in US Dollars which are entered by group companies with a functional currency of HK Dollars to be insignificant.

The exchange rates between HK Dollars and MOP would not be materially fluctuate, hence, the Group’s currency risk in relation to MOP is expected to be minimal.

The Group considers its foreign currency exposure is mainly arising from the exposure of RMB against HK Dollars. The Group regularly reviews the assets and liabilities and the currencies in which the transactions are denominated so as to minimise the Group’s exposure to foreign currency risk.

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities with exposure to foreign currency risk, which are considered as significant by management, at the respective balance sheet dates are as follows:

	Liabilities		Assets
	2008	2007	2008	2007
	HK$’000	HK$’000	HK$’000	HK$’000
US Dollars	–	–	312,414	77,835
RMB	19,951	298	309,166	204,359
HK Dollars	25,132	25,132	14,799	36,856
MOP	22,761	725	105,998	106,987

Sensitivity analysis

The following table details the Group’s sensitivity to a 5% increase and decrease in RMB against HK Dollars. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year end for a 5% change in foreign currency rates. A positive number below indicates an increase in profit where RMB strengthen 5% against HK Dollars. For a 5% weakening of RMB against HK Dollars, there would be an equal and opposite impact on the profit for the year, and the balances below would be negative.

	2008	2007
	HK$’000	HK$’000
Increase in profit	11,612	9,050

In management’s opinion, the sensitivity analysis is not necessarily representative of the inherent foreign exchange risk as the year end exposure does not reflect the exposure during the year.

(iii)

Other price risk

The Group is exposed to equity securities price risk on its available-for-sale and held for trading investments. Management manages this exposure by maintaining a portfolio of investments with different risk profiles.

The Group’s derivative financial instruments are measured at fair value at each balance sheet date. No analysis is presented as the change in market condition has no significant impact to the Group.

The Group has monitored the other price risk and will consider hedging the risk exposure should the need arise.

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to equity price risks at the reporting date.

If the prices of the respective equity instruments had been 5% higher/lower:

profit for the year ended 31 March 2008 would increase/decrease by approximately HK$3,063,000 (2007: increase/decrease by approximately HK$7,789,000) as a result of the changes in fair value of held-for-trading investments; and
investment revaluation reserve would increase/decrease by approximately HK$54,000 (2007: increase/decrease by approximately HK$66,000) for the Group as a result of the changes in fair value of available-for-sale investments.

In management’s opinion, the sensitivity analysis is not necessarily representative of the inherent price risk as the year end exposure does not reflect the exposure during the year.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

(b) Credit risk

The Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge obligations by the counterparties is:

the carrying amount of the respective recognised financial assets as stated in the consolidated balance sheet; and
the amount of contingent liabilities as disclosed in note 50.

In order to minimise the credit risk of the debtors, management has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. Before accepting any new customer, the Group will understand the potential customer’s credit quality and defines its credit limits. Credit sales are made to customers with an appropriate credit history. Credit limits attributed to customers and credit term granted to customers on different business units are reviewed regularly. In addition, the Group reviews regularly the recoverable amount of each individual customer to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The Group has concentration of credit risks as follows:

For the management contracting segment, due to the fact that there are only a few major property developers in Hong Kong, the Group has significant concentration of credit risk in a few customers and significant concentration of credit risk by geographic location in Hong Kong. In view of their credit standings, good payment record in the past and long term relationships with the Group, the directors of the Company consider that the Group’s credit risk is minimal. At the balance sheet date, the outstanding balances (including retention receivable) from the five largest customers amounted to approximately HK$865,154,000 (2007: HK$857,631,000) in aggregate, of which the largest customer represents approximately 18% (2007: 29%) of the total debtors and retention receivable at the balance sheet date.

The Group has advances together with interest thereon to a non-trade debtor which are included in debtors, deposits and prepayments, amounting to approximately HK$222,722,000 as at 31 March 2008 (2007: HK$176,753,000) (see note 32(c) for details) which expose the Group to the concentration of credit risk on this single counterparty. In view that the advance is secured by properties interest in the PRC and that the market value of such property interest is higher than the carrying amount of the balance, the directors of the Company consider that the Group’s exposure to credit risk on this balance is reduced.

During the year ended 31 March 2008, the Group had advanced an unsecured loan to a related company, which is also a company listed in Hong Kong. As at 31 March 2008, the outstanding amount is approximately HK$290,267,000 (2007: Nil) (see note 28(a) for details), which expose the Group to the concentration of credit risk on this single counterparty. In view of good payment record in the past and relationship with the Group, the directors of the Company consider that the Group’s credit risk is minimal.

With respect to concentration of credit risk arising from amounts due from associates, the Group’s exposure to credit risk arising from default of the counterparty is limited as the associates have strong financial position and the Group does not expect to incur a significant loss for uncollected amounts due from these associates.

Details of another concentration of credit risk are set out in note 32(d).

Other than the above, the Group has no other significant concentration of credit risk, which exposure spread over a number of counterparties.

The credit risk on liquid funds is limited because the counterparties are banks with high creditratings assigned by international credit-rating agencies.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

(c) Liquidity risk

In management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. There are unutilised banking facilities available to finance the Group’s working capital requirements. The Group relies on borrowings as a significant source of liquidity. Management monitors the utilisation of bank borrowings and ensures compliance with loan covenants. The Group will also consider the issue of equity instruments so as to finance its investment projects.

The following tables detail the Group’s contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities and based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows.

Liquidity and interest risk tables

Weighted average interest rate % 2008 Non-derivative financial liabilities Creditors and other payables – Amounts due to related companies/ associates/minority shareholders – non interest bearing – – interest bearing 7.25 Bank and other borrowings – fixed rate 7.88 – variable rate 6.91 Convertible notes payable – 2007 Non-derivative financial liabilities Creditors and other payables – Amounts due to related companies/ associates/minority shareholders – non interest bearing – Bank and other borrowings – fixed rate 6.77 – variable rate 6.17 Deferred consideration payable –	On demand or within 90 days HK$’000 1,472,994 64,383 120,000 136,254 251,040 – 2,044,671 851,274 21,500 2,744 322,584 – 1,198,102	More than 90 days and within 365 days HK$’000 140,614 – – 95,029 453,929 – 689,572 3,693 – 166,666 144,109 – 314,468	More than 365 days HK$’000 124,995 – – – 1,139,046 138,737 1,402,778 159,488 – – 516,893 121,213 797,594	Total undiscounted cash flows HK$’000 1,738,603 64,383 120,000 231,283 1,844,015 138,737 4,137,021 1,014,455 21,500 169,410 983,586 121,213 2,310,164	Carrying amount HK$’000 1,738,603 64,383 120,000 225,542 1,580,066 120,551
					3,849,145

					1,014,455 21,500 161,616 862,521 121,213
					2,181,305

6c. Fair value

The fair value of financial assets and financial liabilities are determined as follows:

the fair value of financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices;
the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates from observable current market transaction as input; and

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

the fair value of derivative instruments is arrived at on the basis of valuations carried out by an independent firm of professional valuer. The professional valuer possesses appropriate qualifications and recent experiences in the valuation of similar instruments. Details of the basis are set out in notes 33 and 35.

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair values.

7. TURNOVER

Turnover is analysed as follows:

Revenue from construction contracts Revenue from LPG distribution Service income from infrastructure and logistics facilities Income from usage of infrastructure facilities Property development management service Income from loans receivable Property rental and related income Income from storage and logistics services Sale of properties	2008 HK$’000 4,853,345 378,572 102,698 58,383 59,617 49,312 500 116 – 5,502,543	2007 HK$’000 (restated) 4,325,799 110,414 – – 26,579 80,285 2,635 – 98,000
		4,643,712

8. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group’s operations are currently organised into six operating divisions, namely management contracting, property development management, port and infrastructure development and logistics, LPG distribution, treasury investment and property investment. These divisions form the basis on which the Group reports its primary segment information.

Principal activities are as follows:

Management contracting

Construction of properties on a contract basis

Property development management

– Provision of consultancy and advisory services on property development and building management

Port and infrastructure development and logistics

– Development of port facilities

LPG distribution

Distribution of LPG product

Treasury investment

– Provision of credit services

Property investment

– Leasing of property rental

In the previous year, the Group’s operations were organised into seven segments, namely management contracting, project management, facilities management, port and infrastructure development and logistics, LPG distribution, treasury investment and property investment. During the year, management has reorganised the operating segments by grouping the project management and facilities management segments into the property development management segment as a result of change in the Group’s internal organisational and management structure. Comparative segment information has been restated accordingly.

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Business segment information for the year ended 31 March 2008 is presented below:

TURNOVER External sales Inter-segment sales RESULTS Segment results Unallocated expenses Unallocated income Interest income Finance costs Decrease in fair value of investments held for trading Increase in fair value of derivative financial instruments Impairment loss on an available-for-sale investment Gain on disposal of interest in an associate Share of results of associates Share of results of jointly controlled entities Profit before taxation Taxation Profit for the year	Management contracting HK$’000 4,853,345 – 4,853,345 110,999 – 3,459 6,638 59	Property development management HK$’000 59,617 4,269 63,886 18,023 – – 89 –	Port and infrastructure development and logistics HK$’000 161,197 2,309 163,506 66,405 – – 33,543 –	LPG distribution HK$’000 378,572 – 378,572 (8,194) – – – –	Treasury investment HK$’000 49,312 – 49,312 42,182 – – – –	Property investment HK$’000 500 – 500 670,701 11,086 – 16,060 –	Eliminations HK$’000 – (6,578) (6,578) – – – – –	Consolidated HK$’000 5,502,543 –
								5,502,543

								900,116 (142,672) 22,491 46,577 (53,252) (9,508) 11,086 (1,389) 3,459 56,330 59
								833,297 (315,186)
								518,111

Inter-segment sales are charged at market price or, where no market price was available, at terms determined and agreed by both parties.

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

At 31 March 2008

Port and Property infrastructure Management development development LPG Treasury Property contracting management and logistics distribution investment investment HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ASSETS Segment assets 1,981,852 70,418 1,200,557 254,486 347,971 1,378,726 Project under development Available-for-sale investments Investments held for trading Interests in associates 31,299 3,800 708,664 – – 450 Interests in jointly controlled entities 1,987 – – – – – Unallocated assets Total assets LIABILITIES Segment liabilities 1,821,540 3,570 336,203 15,061 143,592 64,389 Unallocated liabilities Total liabilities OTHER INFORMATION Capital additions attributable to segment 4,856 1,602 75,403 27,228 – 175,338 Unallocated capital additions Depreciation and amortisation attributable to segment 6,447 762 47,758 8,195 3 20 Unallocated depreciation and amortisation Release of prepaid lease payments 575 – 940 443 – – Share-based payment expense 2,425 105 3,590 – 1,917 537 Unallocated amount Impairment loss on receivables 234 – – – 2,452 – Loss (gain) on disposal of property, plant and equipment 28 (3) – 24 – – Unallocated amount	Consolidated HK$’000 5,234,010 3,281,039 57,716 61,255 744,213 1,987 981,253
	10,361,473

	2,384,355 3,867,808
	6,252,163

	284,427 1,129,397
	1,413,824 63,185 3,497
	66,682 1,958 8,574 11,293
	19,867 2,686 49 69
	118

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Business segment information for the year ended 31 March 2007 is presented below:

TURNOVER (restated) External sales Inter-segment sales RESULTS (restated) Segment results Unallocated expenses Unallocated income Interest income Increase in fair value of investments held for trading Finance costs Discount on acquisition of business Gain on disposal of interest in an associate Share of results of associates Share of results of jointly controlled entities Profit before taxation Taxation credit Profit for the year	Management contracting HK$’000 4,325,799 1,596 4,327,395 58,733 – – 1,299 (642)	Property development management HK$’000 26,579 19,638 46,217 (211) – – 681 –	Port and infrastructure development and logistics HK$’000 – 1,264 1,264 (14,472) – – 149,717 –	LPG distribution HK$’000 110,414 – 110,414 3,304 3,755 – – –	Treasury investment HK$’000 80,285 – 80,285 84,208 – 5,067 – –	Property investment HK$’000 100,635 – 100,635 13,863 – – 71,852 –	Eliminations HK$’000 – (22,498) (22,498) – – – – –	Consolidated HK$’000 4,643,712 –
								4,643,712

								145,425 (166,596) 7,718 42,444 89,472 (23,597) 3,755 5,067 223,549 (642)
								326,595 50,552
								377,147

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

At 31 March 2007

Port and Property infrastructure Management development development LPG Treasury Property contracting management and logistics distribution investment investment HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ASSETS Segment assets 1,966,433 27,575 749,338 308,674 520,954 51,729 Project under development Interests in associates 29,038 3,376 605,179 – – 72,641 Available-for-sale investments Investments held for trading Interests in jointly controlled entities 1,928 – – – – – Unallocated assets Total assets LIABILITIES Segment liabilities 1,844,278 4,110 268,316 33,712 2,769 346 Unallocated liabilities Total liabilities OTHER INFORMATION Capital additions attributable to segment 19,418 1,346 401,935 128,491 – 43,600 Unallocated capital additions Depreciation and amortisation attributable to segment 5,853 173 10,085 3,529 44 1 Unallocated depreciation and amortisation Impairment loss on receivables 615 – – – 18,000 – Unallocated amount Loss on disposal of property, plant and equipment 979 – – – – – Unallocated amount Reversal of impairment loss on receivables – – – – 30,324 – Release of prepaid lease payments 575 – 361 95 – – Share-based payment expense – – 9,065 – 2,949 325 Unallocated amount	Consolidated HK$’000 3,624,703 2,411,680 710,234 1,312 155,783 1,928 715,807
	7,621,447

	2,153,531 2,219,067
	4,372,598

	594,790 294,631
	889,421 19,685 2,584
	22,269 18,615 13
	18,628 979 (2)
	977 30,324 1,031 12,339 10,744
	23,083

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Geographical segments

The Group’s operations are located in the PRC other than Hong Kong and Macau, Hong Kong and Macau.

The following table provides an analysis of the Group’s turnover by geographical market based on location of customers, irrespective of the origin of the goods/services:

Hong Kong Macau The PRC other than Hong Kong and Macau	2008 HK$’000 4,112,872 785,850 603,821 5,502,543	2007 HK$’000 (restated) 2,948,541 1,561,006 134,165
		4,643,712

The following is an analysis of the carrying amount of segment assets and capital additions, analysed by the geographical area in which the assets are located:

Hong Kong Macau The PRC other than Hong Kong and Macau	Carrying amount of segment assets 2008 2007 HK$’000 HK$’000 1,636,133 1,577,148 438,584 709,855 3,159,293 1,337,700 5,234,010 3,624,703	Capital additions 2008 2007 HK$’000 HK$’000 4,988 16,952 707 – 278,732 577,838 284,427 594,790	Capital additions 2008 2007 HK$’000 HK$’000 4,988 16,952 707 – 278,732 577,838 284,427 594,790
			594,790

9. OTHER INCOME

Interest income Increase in fair value of derivative financial instruments Net exchange gain Imputed interest income on deferred consideration receivable Reversal of impairment loss on receivables Increase in fair value of investments held for trading Others	2008 HK$’000 46,311 11,086 21,358 266 – – 1,844 80,865	2007 HK$’000 (restated) 42,070 – 5,712 374 30,324 89,472 3,444
		171,396

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

10. OTHER EXPENSES

Decrease in fair value of investments held for trading Impairment loss on receivables Impairment loss on an available-for-sale investment Decrease in fair value of conversion option embedded in loan receivable Accruals of withholding tax on dividend income in connection with a former investment Others 11. FINANCE COSTS Borrowing costs on: Bank borrowings wholly repayable within five years Bank borrowings not wholly repayable within five years Loan from a minority shareholder Effective interest on convertible notes wholly repayable within five years Other borrowings wholly repayable within five years Less: Amount capitalised in respect of contracts in progress Amount capitalised in respect of project under development Amount capitalised in respect of properties under development	2008 HK$’000 9,508 2,686 1,389 1,333 – – 14,916 2008 HK$’000 78,245 21,931 – 7,512 8,954 116,642 (415) (57,887) (5,088) 53,252	2007 HK$’000 – 18,628 – 1,650 45,415 3,375 69,068 2007 HK$’000 23,349 8,706 155 – 7,598 39,808 (3,307) (11,710) (1,194) 23,597

The capitalised borrowing costs represent the borrowing costs incurred by the entities on borrowings whose funds were specifically invested in the project and properties during the year.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

12. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

(a) Directors’ emoluments

The emoluments paid or payable to each of the seven (2007: seven) directors are as follows:

Name of directors 2008 Lau Ko Yuen, Tom Chan Kwok Keung, Charles Chow Ming Kuen, Joseph Kwok Shiu Keung, Ernest Chan Shu Kin Leung Po Wing, Bowen Joseph Li Chang An 2007 Lau Ko Yuen, Tom Chan Kwok Keung, Charles Chow Ming Kuen, Joseph Kwok Shiu Keung, Ernest Chan Shu Kin Leung Po Wing, Bowen Joseph Li Chang An	Fees HK$’000 360 320 760 380 420 340 300 2,880 360 320 787 380 439 227 68 2,581	Retirement Salaries benefit and other Discretionary scheme benefits bonus contributions HK$’000 HK$’000 HK$’000 4,300 3,887 319 – – – – – – – – – – – – – – – – – – 4,300 3,887 319 4,300 – 319 – – – – – – – – – – – – – – – – – – 4,300 – 319	Share- based payment HK$’000 6,790 – – – – – – 6,790 5,402 – – – – 1,174 1,274 7,850	Total HK$’000 15,656 320 760 380 420 340 300
				18,176

				10,381 320 787 380 439 1,401 1,342
				15,050

The above discretionary bonus is performance related incentive payment determined by reference to the results of the Group.

None of the directors has waived any emoluments during the year.

(b) Employees’ emoluments

The five highest paid individuals in the Group for the year included one director (2007: one director) of the Company, details of whose emoluments are set out in note 12(a) above.

The aggregate emoluments of the remaining four (2007: four) highest paid individuals, who are employees of the Group, are as follows:

Salaries and other benefits Discretionary bonus Retirement benefit scheme contributions Share-based payment expense	2008 HK$’000 9,851 1,413 132 2,708 14,104	2007 HK$’000 8,120 1,102 154 3,645
		13,021

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Their emoluments were within the following bands:

HK$2,000,001 to HK$2,500,000 HK$2,500,001 to HK$3,000,000 HK$3,000,001 to HK$3,500,000 HK$3,500,001 to HK$4,000,000 HK$4,500,001 to HK$5,000,000 HK$5,000,001 to HK$5,500,000	Number of employees 2008 2007 – 2 2 – – 1 1 – 1 – – 1 4 4	Number of employees 2008 2007 – 2 2 – – 1 1 – 1 – – 1 4 4
		4

During the year, no emoluments were paid by the Group to the five highest paid individuals, including directors, as an inducement to join or upon joining the Group or as compensation for loss of office.

13. PROFIT BEFORE TAXATION

Profit before taxation has been arrived at after charging: Amortisation of intangible assets (included in distribution costs) Auditor’s remuneration Cost of inventories recognised as an expense Cost of construction works recognised as an expense Depreciation of property, plant and equipment_(Note (a) below) Loss on disposal of property, plant and equipment Operating lease rentals in respect of: Premises Plant and machinery Release of prepaid lease payments Staff costs(Note (b) below) and after crediting: Dividend income from investments held for trading Rental income under operating leases in respect of: Investment properties, net of outgoings of HK$89,000 (2007: HK$1,924,000) Plant and machinery Total interest income _Notes: (a) Depreciation of property, plant and equipment: Amount provided for the year Less: Amount capitalised in respect of contracts in progress Amount capitalised in respect of project under development Amount capitalised in respect of properties under development	2008 HK$’000 1,334 7,017 360,312 4,679,141 65,348 118 22,581 2,567 1,958 173,526 508 411 – 83,834 2008 HK$’000 69,277 (2,208) (1,281) (440) 65,348	2007 HK$’000 490 6,340 174,652 4,192,824 21,779 977 16,925 1,134 1,031 151,386 2,819 – 17 100,714

		2007 HK$’000 24,255 (1,491) (973) (12)
		21,779

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

(b) Staff costs: Directors’ emoluments_(note 12(a)) Other staff costs: Salaries and other benefits Retirement benefit scheme contributions, net of forfeited contributions of HK$1,072,000 (2007: HK$1,808,000) Share-based payment expense Less: Amount capitalised in respect of contracts in progress Amount capitalised in respect of project under development Amount capitalised in respect of properties under development 14. TAXATION CHARGE (CREDIT) The charge (credit) comprises: Hong Kong Profits Tax: Current year Overprovision in prior years Taxation arising in other jurisdictions: Current year Under(over)provision in prior years Deferred taxation(note 43)_ LAT Change in tax rate Others Taxation attributable to the Company and its subsidiaries	18,176 396,148 14,833 13,077 442,234 (255,306) (7,469) (5,933) 173,526 2008 HK$’000 – – – 40,175 1,103 41,278 140,652 – 133,256 273,908 315,186	15,050 321,167 10,263 15,233 361,713 (202,805) (6,495) (1,027) 151,386 2007 HK$’000 4,325 (268) 4,057 9,109 (565) 8,544 – (62,666) (487) (63,153) (50,552)

No tax is payable on the profit for the year ended 31 March 2008 arising in Hong Kong since the assessable profit is wholly absorbed by tax losses brought forward. Hong Kong Profits Tax is calculated at 17.5% of the estimated assessable profits for the year ended 31 March 2007.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

According to the requirements of the Provisional Regulations of the PRC on LAT (中華人民共和國土地增值稅暫行條例) effective from 1 January 1994, and the Detailed Implementation Rules on the Provisional Regulations of the PRC on LAT (中華人民共和國土地增值稅暫行條例實施細則) effective from 27 January 1995, all income from the sale or transfer of land use rights, buildings and their attached facilities in the PRC is subject to LAT at progressive rates ranging from 30% to 60% of the appreciation value.

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

The taxation charge (credit) for the year can be reconciled to the profit before taxation per the consolidated income statement as follows:

Profit before taxation Tax at Hong Kong Profits Tax rate of 17.5% (2007: 17.5%) Tax effect of share of results of associates/jointly controlled entities Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of tax losses not recognised Tax effect of other deductible temporary difference not recognised Tax effect of utilisation of tax losses previously not recognised Tax effect of utilisation of other deductible temporary difference previously not recognised Decrease in deferred tax liability resulting from change in tax rate enacted in March 2007 of certain subsidiaries Tax effect of different tax rates of subsidiaries operating in other jurisdictions Effect of recognising LAT in respect of the fair value changes in investment properties Under(over)provision in prior years Taxation charge (credit) for the year Details of the deferred taxation are set out in note 43. 15. DISTRIBUTION	2008 HK$’000 833,297 145,827 (9,868) 17,011 (20,681) 33,407 63 (11,789) (227) – 19,688 140,652 1,103 315,186	2007 HK$’000 326,595

		57,154 (39,008) 24,305 (22,174) 19,170 3,053 (22,747) (1,158) (62,666) (5,648) – (833)
		(50,552)

Dividends recognised as distributions to equity holders of the Company during the year: Final dividend for 2007 – HK1.5 cents (2007: HK1.5 cents for 2006) per share Interim dividend for 2008 – HK1.5 cents (2007: HK1.5 cents for 2007) per share Special dividend by way of distribution of the value derived from the Group’s divestment of China Strategic Holdings Limited in 2007 – HK22.2 cents per share	2008 HK$’000 22,467 22,586 – 45,053	2007 HK$’000 21,939 22,069 325,660
		369,668

Of the distribution made during the year, approximately HK$15,897,000 (2007: HK$15,595,000) and HK$2,612,000 (2007: HK$8,882,000) were settled in shares under the Company’s scrip dividend schemes announced by the directors of the Company on 20 September 2007 and 18 January 2008 in respect of the final dividend for the year ended 31 March 2007 and the interim dividend for 2008, respectively, and were credited to the retained profits of the Company during the year.

The final dividend for the year ended 31 March 2008 is proposed to be distributed in the form of warrants to be issued on the basis of one warrant for every six existing shares held by shareholders whose names appear on the register of members of the Company on 18 September 2008. Each warrant will entitle shareholders of the Company to subscribe for one new share at an initial subscription price of HK$1.0 per share in cash, subject to antidilutive adjustments, at any time between the date of issue of the warrants and the day immediately preceding the anniversary of the date of issue, both days inclusive. The value of the proposed dividend will be determined upon the approval of the issue of the warrants. For the year ended 31 March 2007, a final dividend of HK1.5 cents per share amounting to about HK$22,393,000 was proposed.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

16. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share for the year is based on the following data:

Earnings attributable to equity holders of the Company for the purposes of basic and diluted earnings per share Weighted average number of ordinary shares for the purpose of basic earnings per share Effect of dilutive potential ordinary shares: Share options Weighted average number of ordinary shares for the purpose of diluted earnings per share	2008 HK$’000 359,982 2008 Number of shares 1,498,636,111 14,921,337 1,513,557,448	2007 HK$’000 345,665

		2007 Number of shares 1,462,372,940 19,042,143
		1,481,415,083

The dilutive potential ordinary shares of convertible notes have anti-dilutive effect.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

17. PROPERTY, PLANT AND EQUIPMENT

COST At 1 April 2006 Exchange realignment On acquisition of business Additions Disposal At 31 March 2007 Exchange realignment Transfer from project under development Additions Disposal At 31 March 2008 DEPRECIATION At 1 April 2006 Exchange realignment Provided for the year Eliminated on disposal At 31 March 2007 Exchange realignment Provided for the year Eliminated on disposal At 31 March 2008 CARRYING AMOUNT At 31 March 2008 At 31 March 2007	Buildings HK$’000 900 1,192 45,891 18,895 (792) 66,086 6,434 21,302 8,907 – 102,729 201 9 1,414 (223) 1,401 412 4,963 – 6,776 95,953 64,685	Plant and machinery HK$’000 58,325 – – 13,062 (9,106) 62,281 – – 3,186 (963) 64,504 43,306 – 5,076 (8,051) 40,331 – 5,945 (910) 45,366 19,138 21,950	Port facilities HK$’000 – – – – – – – 149,721 – – 149,721 – – – – – 1,358 24,019 – 25,377 124,344 –	LPG equipment HK$’000 – 9,940 393,626 194 – 403,760 39,391 – 12,509 (1) 455,659 – – 10,828 – 10,828 2,345 22,762 (1) 35,934 419,725 392,932	Motor vehicles and vessels HK$’000 25,447 699 18,127 9,286 (1,562) 51,997 3,055 – 10,438 (2,236) 63,254 17,263 54 2,959 (1,206) 19,070 494 5,624 (1,845) 23,343 39,911 32,927	Furniture, fixtures and computer equipment HK$’000 72,010 156 – 8,640 (2,035) 78,771 524 – 9,798 (1,169) 87,924 60,112 37 3,978 (1,065) 63,062 193 5,964 (835) 68,384 19,540 15,709	Total HK$’000 156,682 11,987 457,644 50,077 (13,495)
							662,895 49,404 171,023 44,838 (4,369)
							923,791
							120,882 100 24,255 (10,545)
							134,692 4,802 69,277 (3,591)
							205,180
							718,611

							528,203

The above items of property, plant and equipment are depreciated on a straight-line basis at the following rates per annum:

Buildings

Plant and machinery Port facilities LPG equipment Motor vehicles and vessels Furniture and fixtures Computer equipment

Over the remaining period of the relevant leases or fifty years, whichever is shorter 10%

2%–20% 5%–10% 5%–20% 8%–20% 20%–33[1] /3%

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

The carrying amount of buildings are analysed as follows:

Buildings erected on long-term leasehold land in the PRC Buildings erected on medium-term leasehold land in the PRC INVESTMENT PROPERTIES FAIR VALUE At 1 April 2006 and 31 March 2007 Transferred from project under development Exchange realignment Acquisition of assets through acquisition of subsidiaries Increase in fair value At 31 March 2008	2008 HK$’000 88 95,865 95,953	2007 HK$’000 91 64,594
		64,685

		HK$’000 – 378,551 63,791 118,549 669,460
		1,230,351

18. INVESTMENT PROPERTIES

Certain investment properties are held for rental purposes under operating leases.

During the year, the Group completed the reclamation of certain sea area and obtained the certificate of completion of land reclamation (the “Certificate”) in respect of certain land area (the “Formed Land”) in Jiangsu Province, the PRC. Such Formed Land, the future use of which is currently undetermined, has been recognised as investment properties upon the obtaining of the Certificate. The relevant costs, which include the cost of sea use rights, development expenditure, borrowing costs capitalised and other directly attributable expenses, amounting to HK$378,551,000, have been reclassified from project under development.

The Group has obtained a certificate from the local land bureau for the Formed Land. Once the future use of the land is determined, the Group will apply for the appropriate land use right certificates of the Formed Land. The directors of the Company considered that there is no material impediment to obtain those land use rights certificates for the Group.

The fair value of the Group’s investment properties at 31 March 2008 has been arrived at on the basis of a valuation carried out as at that date by Greater China Appraisal Limited, an independent qualified professional valuer not connected with the Group. In valuing the fair value of the investment properties, the comparison method is adopted where comparison based on prices information of recent transacted prices of comparable property is made. Comparable property of similar size, character and location are analysed in order to arrive at a fair comparison of capital values. The gain from fair value adjustment amounted to HK$669,460,000 had been recognised in the profit or loss during the current year.

Deferred tax consequences in respect of the revalued investment properties are assessed on the basis that reflects the tax consequences that would follow from the manner in which the Group expects to recover the carrying amounts of the property at each balance sheet date. For Formed Land held for undetermined future use located in the PRC, management of the Company, for the purpose of deferred tax calculation, has made a best estimate that half of the Formed Land will be realised through sale in the long term. The temporary difference of the relevant portion between the tax base of the revalued investment properties and their carrying amounts therefore would be subject to PRC LAT.

The investment properties of the Group are under medium-term leasehold land in the PRC.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

19. PROJECT UNDER DEVELOPMENT

Sea use rights Development costs	2008 HK$’000 1,631,465 1,649,574 3,281,039	2007 HK$’000 1,747,484 664,196
		2,411,680

The amount relates to a development project located in Jiangsu Province, the PRC. The Group is undergoing the reclamation of certain area of the sea. According to the sea use certificates, the sea use rights are granted for terms ranging from 49 to 50 years commencing 2004.

20. PROPERTIES UNDER DEVELOPMENT

At 1 April, at cost Expenditure incurred during the year_(Note)_ At 31 March, at cost Represented by: Amount shown under non-current assets Amount shown under current assets	2008 HK$’000 127,190 218,467 345,657 172,031 173,626 345,657	2007 HK$’000 – 127,190
		127,190

		44,458 82,732
		127,190

The amount relates to certain property development projects located in Jiangsu Province, the PRC.

Note: The expenditure included a payment for lease of land in Jiangsu Province of HK$7,369,000 (2007: HK$107,176,000), of which HK$7,369,000 (2007: HK$40,342,000) is shown as non-current assets.

21. PREPAID LEASE PAYMENTS

The Group’s prepaid lease payments represent land in the PRC and Hong Kong held under medium-term leases and are analysed for reporting purposes as follows:

Leasehold land in Hong Kong Leasehold land outside Hong Kong Analysed for reporting purposes as: Current assets Non-current assets	2008 HK$’000 22,561 58,552 81,113 2,343 78,770 81,113	2007 HK$’000 23,136 46,598
		69,734

		1,766 67,968
		69,734

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

22. GOODWILL

COST AND CARRYING AMOUNTS At 1 April Arising on acquisition of subsidiaries At 31 March	2008 HK$’000 61,646 2,323 63,969	2007 HK$’000 61,646 –
		61,646

For the purpose of impairment testing, the carrying amount of goodwill at 31 March 2008 has been allocated to management contracting and property development management’s cash generating units (“CGUs”).

The recoverable amount of the above CGUs has been determined based on value in use calculations. The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next two years and extrapolates cash flows for the following five years with a steady growth rate of 5%. The rate used to discount the forecast cash flows is 9%. The value in use calculations is calculated based on the budgeted gross margin, which is determined using the unit’s past performance and management’s expectations for the market development.

During the year ended 31 March 2008, management of the Group determines that there is no impairment of the CGUs.

23. OTHER INTANGIBLE ASSETS

COST At 1 April 2006 Disposal Arising on acquisition of business Exchange realignment At 31 March 2007 Additions Exchange realignment At 31 March 2008 AMORTISATION At 1 April 2006 Provided for the year Exchange realignment At 31 March 2007 Provided for the year Exchange realignment At 31 March 2008 CARRYING VALUE At 31 March 2008 At 31 March 2007	Motor vehicles Club registration membership marks in Hong Kong HK$’000 HK$’000 (Note a) (Note a) 973 7,062 (115) – – – – – 858 7,062 – – – – 858 7,062 – – – – – – – – – – – – – – 858 7,062 858 7,062	Premium on leasehold land HK$’000 (Note b) – – 9,210 233 9,443 – 921 10,364 – 112 – 112 247 24 383 9,981 9,331	Rights of operation HK$’000 (Note c) – – 35,923 907 36,830 – 3,593 40,423 – 358 10 368 765 79 1,212 39,211 36,462	Customer base HK$’000 (Note d) – – 2,032 51 2,083 – 204 2,287 – 20 1 21 303 19 343 1,944 2,062	Know- how HK$’000 (Note e) – – – – – 2,366 – 2,366 – – – – 19 1 20 2,346 –	Total HK$’000 8,035 (115) 47,165 1,191
						56,276 2,366 4,718
						63,360
						– 490 11
						501 1,334 123
						1,958
						61,402

						55,775

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Notes:

(a) The assets have indefinite useful life. The directors are of the opinion that the club membership and motor vehicles registration marks are worth at least their carrying amounts.
(b) The amount represents the premium paid on leasehold land in Wuhan, the PRC upon acquisition by the Group through the acquisition of the relevant business and the amount is to be amortised on the same basis as the related prepaid lease payments over 36 to 41 years.
(c) Rights of operation represent the fair value of rights to operate LPG business in Wuhan, the PRC. The rights of operation are amortised on a straight-line basis over the operation period of 50 years.
(d) Customer base represents the fair value of customers relationship acquired for LPG business through acquisition of business. The amortisation is provided on a straight-line basis over 10 years.
(e) Know-how represents fair value of technology know-how for motor vehicles to use LPG as fuel. The amortisation is provided on a straight-line basis over 10 years.

24. INTERESTS IN ASSOCIATES

Cost of unlisted investments in associates, less impairment_(Note)_ Share of post-acquisition profits and reserves, net of dividends received	2008 HK$’000 499,343 244,870 744,213	2007 HK$’000 503,716 206,518
		710,234

Note: As at 31 March 2008 and 2007, the unlisted investment includes the Group’s 45% equity interest in Nantong Port Group Limited (“Nantong Port Group”), which is a sino-foreign joint venture enterprise registered in the PRC. Nantong Port Group is principally engaged in providing cargo loading and off loading, storage, shipping agent, cargo agent, ship anchoring, ship repairing, port machinery, shipping logistics and ship piloting services in Nantong Port, Jiangsu Province, the PRC.

The financial year end date of Nantong Port Group is 31 December and its latest financial information that is available to the Group is in respect of its financial year ended 31 December 2007. Accordingly, the Group’s share of results and interest in this principal associate at 31 March 2008 and 2007 is determined based on the net assets of the associate for the year ended and as at 31 December 2007 and 2006 respectively. No significant transaction or event is noted between the year end dates of the associate and of the Group.

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Summarised financial information in respect of that associate is set out below:

Post acquisition result: Turnover Profit for the year/period Group’s share of profit Discount on acquisition of associate Financial position: Total assets Total liabilities Minority interests Group’s share of the associate’s net assets	Year ended 31.12.2007 HK$’000 723,306 75,632 34,034 – 34,034 3,196,920 (1,632,973) (479) 1,563,468 703,560	Period ended 31.12.2006 HK$’000 129,383 12,011 5,405 144,679 150,084 2,668,100 (1,333,452) (364) 1,334,284 600,428

The combined summarised financial information in respect of the Group’s other associates is set out below:

Financial position Total assets Total liabilities Minority interests Net assets Group’s share of associates’ net assets Post-acquisition results Turnover Profit for the year Group’s share of post-acquisition results of associates for the year	2008 HK$’000 412,930 (364,054) (2,214) 46,662 40,653 890,943 52,157 22,296	2007 HK$’000 451,533 (272,901) (2,016) 176,616 109,806 26,513 150,795 73,465

The Group has discontinued recognition of its share of losses of one of the associates. The accumulated recognised share of losses and the amount of profit for the year attributable to the Group (based on unaudited management accounts) are as follows:

Unrecognised share of profits of the associate for the year Accumulated unrecognised share of losses of the associate	2008 HK$’000 368 (50,632)	2007 HK$’000 1,591 (51,000)

Particulars of the Group’s principal associates at 31 March 2008 and 2007 are set out in note 56(b).

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

25. INTERESTS IN JOINTLY CONTROLLED ENTITIES

Cost of unlisted investments in jointly controlled entities Share of post-acquisition profits, net of dividends received	2008 HK$’000 – 1,987 1,987	2007 HK$’000 – 1,928
		1,928

The combined summarised financial information in respect of the Group’s jointly controlled entities is set out below:

Total assets Total liabilities Net assets Group’s share of net assets of jointly controlled entities Turnover Profit (loss) for the year Group’s share of profit (loss) of jointly controlled entities for the year	2008 HK$’000 11,279 (7,305) 3,974 1,987 – 117 59	2007 HK$’000 11,437 (7,580)
		3,857

		1,928

		7,798 (1,283)

		(642)

Particulars of the Group’s principal jointly controlled entity at 31 March 2008 and 2007 are set out in note 56(c).

26. AVAILABLE-FOR-SALE INVESTMENTS

Listed equity securities in Hong Kong in overseas Unlisted equity securities in Hong Kong in overseas Represented by: Non-current Current Market value of listed securities	2008 HK$’000 343 – 343 738 56,635 57,373 57,716 1,081 56,635 57,716 343	2007 HK$’000 732 580
		1,312
		– –
		–
		1,312

		1,312 –
		1,312

		1,312

The carrying amount of the overseas unlisted equity securities as at 31 March 2008 of HK$56,635,000 (2007: Nil) is measured at cost less impairment at the balance sheet date because the range of reasonable fair value estimates is so significant that the directors of the Company are of the opinion that their fair value cannot be measured reliably.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

27. LOANS RECEIVABLE

The amounts bear interest at the following rates: 2% per annum_(Note)_ 15% per annum 20% per annum Interest free Total amount Less: Amount due within one year shown under current assets Amount due after one year Analysed as: Secured Unsecured Movement in the allowance for doubtful debts: Balance at beginning of the year Impairment losses recognised on loans receivable Amounts recovered during the year Balance at end of the year	2008 HK$’000 32,222 18,000 – – 50,222 (18,000) 32,222 18,000 32,222 50,222 2008 HK$’000 4,773 15,113 – 19,886	2007 HK$’000 30,956 150,000 30,000 1,508
		212,464 (181,508)
		30,956

		181,508 30,956
		212,464

		2007 HK$’000 8,586 – (3,813)
		4,773

Note: During the year ended 31 March 2007, the Group has subscribed for convertible bond with an aggregate face value of HK$36,858,000 issued by a company in which the substantial shareholder of the Company has significant influence. The coupon interest of the convertible bond is 2% per annum with maturity in June 2011. The amount recognised in loans receivable represent the debt element of the convertible bond and is determined using an effective interest rate of 6.47% per annum at initial recognition. The embedded derivative element of the convertible bond is separately accounted for as derivative financial instrument and stated in the consolidated balance sheet at fair value (see note 33).

28. AMOUNTS DUE FROM RELATED COMPANIES

Unsecured loans receivable: Associates of ITC Corporation Limited (“ITC”)(Note (a)) Subsidiaries of ITC_(Note (a)) Other receivables: Associates of ITC(Note (a)) Subsidiaries of ITC(Note (a)) Other related companies(Note (b))_ Total, amount due within one year shown under current assets	2008 HK$’000 290,267 – 290,267 6,478 8 – 296,753	2007 HK$’000 – 141,401
		141,401 489 7,324 885
		150,099

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Notes:

(a) The companies are related companies of the Group as Dr Chan Kwok Keung, Charles (“Dr Chan”), a director of the Company, has significant influence over the companies. ITC is also the substantial shareholder of the Company.

The amounts are unsecured and interest free except for loans receivable of HK$102,261,000 (2007: HK$141,401,000) and HK$188,006,000 (2007: Nil) which bear variable interest rate at 2% over Hong Kong Best Lending Rate (“HKBLR”) (i.e. 7.25% to 9.5%) and a fixed rate of 10.32% per annum, respectively.

(b) The balance as at 31 March 2007 represented loan and interest receivable of HK$885,000 from Parona Limited, a shareholder of an associate, in which certain close family members of a director of the Company, had an interest. The amount was secured by shares of the associate held by Parona Limited and interest free.

29. AMOUNTS DUE FROM ASSOCIATES

Unsecured other receivables, interest free Promissory note with face value of HK$117,000,000 carrying interest at 0.75% over HIBOR, secured by the shares of certain subsidiaries of an associate and wholly repayable on or before January 2009_(Note)_	2008 HK$’000 59,777 – 59,777	2007 HK$’000 70,314 117,000
		187,314

Note: The effective interest rate was 5.17% for the year ended 31 March 2007. During the year, that associate had disposed of its property interests through disposal of its subsidiaries and certain proceeds were used to fully repay the amount due to the Group.

30. DEFERRED CONSIDERATION RECEIVABLE

As part of the consideration for the disposal of certain subsidiaries in previous years, deferred consideration of HK$15,000,000 is to be settled in cash by the purchaser under four annual instalments commencing from 30 October 2006. The amount is unsecured and interest free. The fair value of the deferred consideration at date of initial recognition is determined based on the estimated future cash flows discounted at 3% per annum.

The carrying amounts are analysed for reporting purpose as follows:

Non-current assets Current assets (included in debtors, deposits and prepayments)	2008 HK$’000 2,863 7,932 10,795	2007 HK$’000 6,597 3,932
		10,529

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

31. AMOUNTS DUE FROM (TO) CUSTOMERS FOR CONTRACT WORKS

Contracts in progress at the balance sheet date: Contract costs incurred to date Recognised profits less recognised losses Less: Progress billings Represented by: Amounts due from customers for contract works Amounts due to customers for contract works 32. DEBTORS, DEPOSITS AND PREPAYMENTS Debtors_(Note a) Retentions held by customers for contract works(Note b) Interest-bearing advance(Note c) Other receivable(Note d)_ Prepayment on tax in connection with a former investment Deferred consideration receivables Others	2008 HK$’000 47,493,394 1,336,681 48,830,075 (49,432,928) (602,853) 201,589 (804,442) (602,853) 2008 HK$’000 882,254 511,560 222,722 133,038 159,653 7,932 504,409 2,421,568	2007 HK$’000 43,566,229 1,217,200 44,783,429 (45,598,340) (814,911) 223,637 (1,038,548) (814,911) 2007 HK$’000 813,035 477,403 176,753 – 142,465 3,932 297,102 1,910,690

The balance of debtors, deposits and prepayments is net of allowance for doubtful debts and the movement in the allowance for doubtful debts is as follows:

Balance at beginning of the year Impairment losses recognised on receivables Amounts written off as uncollectible Amounts recovered during the year Exchange realignment Balance at end of the year	2008 HK$’000 37,686 234 (1,818) (508) 38 35,632	2007 HK$’000 34,135 18,628 (12,042) (3,035) – 37,686

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Notes:

(a) The Group’s credit terms for its management contracting segment are negotiated at terms determined and agreed with its customers. Credit term for property leasing business is payable according to the agreements and the credit terms granted by the Group to other debtors normally range from 30 days to 90 days.

Included in debtors, deposits and prepayments are debtors of approximately HK$882,254,000 (2007: HK$813,035,000) and their aged analysis is as follows:

Within 90 days More than 90 days and within 180 days More than 180 days	2008 HK$’000 807,265 16,366 58,623 882,254	2007 HK$’000 (restated) 744,690 19,346 48,999
		813,035

As at 31 March 2008, included in the Group’s debtor balances are debtors with aggregate carrying amount of HK$60,546,000 (2007: HK$72,341,000) which were past due at the balance sheet date for which the Group has not provided for impairment loss. There has not been significant change in credit quality and the directors of the Company considered the amounts are still recoverable. The Group does not hold any collateral over these balances.

Ageing of debtors which are past due but not impaired

Within 90 days More than 90 days and within 180 days More than 180 days	2008 HK$’000 1,834 89 58,623 60,546	2007 HK$’000 7,911 15,521 48,999
		72,431

At the respective balance sheet dates, the directors considered the debts not impaired nor past due are of good credit quality.

(b) At 31 March 2008, an amount of approximately HK$249,651,000 (2007: HK$239,707,000) are expected to be recovered or settled after twelve months of the balance sheet date.
(c) This represents advances made to an independent third party in previous years. The amount carries floating-rate interest at the benchmark lending rate as announced by the People’s Bank of China plus 8% per annum which is approximately of 15.5% (2007: 14.4%) per annum during the year and is secured by certain properties interest in the PRC. Fair value of the relevant properties interest as at 31 March 2008 is approximately RMB422,752,000 (2007: RMB326,672,000) according to a valuation report issued by an independent property valuer.
(d) The amount represented a receivable from a third party, which is also the convertible notes holder of the Company. The amount is non-interest bearing. During the year, the convertible notes holder has engaged the Company as an agent to look for any potential buyer to purchase the convertible notes of the Company from the convertible notes holder at a price not lower than RMB120,000,000. The receivable is secured by the convertible notes of the Company. The directors of the Company consider the Group will be able to identify a buyer to complete the transaction within twelve months of the balance sheet date and therefore the amount is classified as a current asset. As the Group currently has the custody of the convertible notes, the credit risk is considered as minimal.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

33. CONVERSION OPTION EMBEDDED IN LOAN RECEIVABLE

The Group had subscribed a convertible bond and the conversion option is separated as derivative financial instrument and stated in the consolidated balance sheet at fair value. The fair value is calculated using option pricing model and the change in fair value had been recognised in the consolidated income statement.

34. INVESTMENTS HELD FOR TRADING

Listed equity securities, at quoted bid price in Hong Kong in overseas	2008 HK$’000 35,080 26,175 61,255	2007 HK$’000 129,496 26,287
		155,783

35. DERIVATIVE FINANCIAL INSTRUMENTS

In May 2007, the Group has entered into a joint development agreement (the “Agreement”) with an independent third party (the “joint venture partner”) for a property development project in Shanghai (the “Property Interests”). Under the Agreement, the joint venture partner granted an unlisted equity call option to the Group at a consideration of RMB10,000,000 (equivalent to approximately HK$11,088,000). The Group has a right to acquire the Property Interests at a consideration of approximately RMB254,204,000 plus all development costs expended onto the Property Interests at any time from the date of the Agreement to the expiry of 10 working days upon issuance of report certifying 25% completion of the development of the Property Interests. The joint venture partner has a right to cancel the option by giving RMB20,000,000 (equivalent to HK$22,174,000) to the Group at anytime. The equity call option is measured at fair value at each balance sheet date, determined with reference to a valuation performed by independent valuer. In assessing the fair value of the option, the valuer use the comparison method to assess the underlying asset value of the Property Interests. The fair value of the option represented the lower of the compensation from the cancellation of option and the difference between fair value of the Property Interests and the exercise price of the option.

36. PLEDGED BANK DEPOSITS, SHORT TERM BANK DEPOSITS AND BANK BALANCES AND CASH

Pledged bank deposits represent deposits pledged to banks to secure general banking facilities granted to the Group. Deposits amounting to HK$34,269,000 (2007: HK$42,601,000) have been pledged to secure general banking facilities with maturity within one year of the balance sheet date and are therefore classified as current assets.

The pledged bank deposits and short term bank deposits with maturity date of less than three months carry prevailing market interest rates ranging from 0.75% to 2.15% (2007: 2.5% to 4.5%) per annum. The bank balances carry interest rates ranging from nil to 1.15% (2007: nil to 3.0%) per annum.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

37. CREDITORS AND ACCRUED EXPENSES

The following is an analysis of creditors and accrued charges at the balance sheet date:

Creditors aged: Within 90 days More than 90 days and within 180 days More than 180 days Accrual of withholding tax on dividend income and interest charges Retentions held by the Group for contract works_(Note)_ Other payables due to suppliers in respect of capital additions Other accruals Other payables	2008 HK$’000 450,612 7,379 13,031 471,022 112,944 392,298 404,886 3,137 519,545 1,903,832	2007 HK$’000 329,211 8,230 13,585
		351,026 100,785 320,800 165,258 3,394 216,727
		1,157,990

Note: At 31 March 2008, an amount of approximately HK$124,995,000 (2007: HK$159,488,000) are expected to be paid or settled after more than twelve months from the balance sheet date.

38. AMOUNTS DUE TO ASSOCIATES

The amounts are unsecured, interest free and repayable on demand.

39. AMOUNTS DUE TO MINORITY SHAREHOLDERS

The amounts are unsecured, interest free and repayable on demand.

40. AMOUNTS DUE TO RELATED COMPANIES

Unsecured loans payable bears interest at 2% over HKBLR per annum: Subsidiary of ITC Associate of ITC Other payables: Associates of ITC Subsidiary of ITC	2008 HK$’000 70,000 50,000 120,000 9,571 3,480 133,051	2007 HK$’000 – –
		– – –
		–

Note: The above companies are related companies of the Group as ITC has significant influence over the companies and they are under common directorship. ITC is the substantial shareholder of the Company.

The amounts are unsecured, repayable on demand and interest free except for loans payable of HK$120,000,000 (2007: Nil) which bear variable interest rate at 2% over HKBLR (ie. 7.25% to 9.5%).

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

41. BANK AND OTHER BORROWINGS

Bank and other borrowings comprise: Bank loans Other loans Bank overdrafts Analysed as: Secured Unsecured The bank and other borrowings are repayable as follows: Within one year or on demand More than one year, but not exceeding two years More than two years, but not exceeding three years More than three years, but not exceeding four years More than four years, but not exceeding five years More than five years Less: Amount due within one year or on demand shown under current liabilities Amount due after one year	2008 HK$’000 1,779,449 26,159 – 1,805,608 1,225,901 579,707 1,805,608 839,410 305,379 224,891 198,936 95,528 141,464 1,805,608 (839,410) 966,198	2007 HK$’000 943,554 60,151 20,432
		1,024,137

		644,968 379,169
		1,024,137

		597,386 116,157 11,551 64,481 74,481 160,081
		1,024,137 (597,386)
		426,751

The above bank borrowings include fixed-rate borrowings of approximately HK$209,534,000 (2007: HK$161,616,000) repayable within one year carrying interest ranging from 6.39% to 8.96% (2007: 6.12% to 7.344%) per annum.

The remaining bank borrowings carry floating-rate interest ranging from 2.25% to 7.94% (2007: 4.67% to 7.75%) per annum.

42. CONVERTIBLE NOTES PAYABLE

During the year, the Company issued zero coupon convertible notes with an aggregate principal amount of HK$121,521,000 for settlement of the consideration for the LPG assets acquired during the year ended 31 March 2007. The convertible notes are denominated in Hong Kong dollars. The notes entitled the holders to convert them into ordinary shares of the Company at any time between 15th day after the date of issue of the notes and 15 days prior to their respective maturity dates on 18 April 2010 and 31 May 2010 at a conversion price of HK$4.25 per share subject to anti-dilutive adjustment in accordance with the agreement. If the notes are not converted, they will be redeemed on maturity date at 114.167% of the principal amount of the notes outstanding. The Company may at any time and from time to time purchase the convertible notes at any price as agreed between the Company and the noteholder. The effective interest rate of the liability component of notes issued on 19 April 2007 and 1 June 2007 are 7.02% and 7.58%, respectively.

The movement of the liability component of the convertible notes for the year is set out below:

Issued during the year Interest charge Carrying amount at the end of the year	2008 HK$’000 113,039 7,512
	120,551

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

43. DEFERRED TAXATION

The following are the major deferred tax liabilities (assets) recognised and movements thereon during the current and prior years:

and prior years:
At 1 April 2006 Exchange realignment On acquisition of a business Change in tax rate credited to income statement Charge (credit) to income statement At 31 March 2007 Exchange realignment Transfer (Credit) charge to income statement At 31 March 2008	Accelerated tax depreciation HK$’000 3,761 – – – 1,484 5,245 – – (32) 5,213	Recognition Tax of contracting losses income HK$’000 HK$’000 (1,905) (1,856) – – – – – – (2,253) 769 (4,158) (1,087) – – – – (242) 274 (4,400) (813)	Fair value adjustment on investment properties HK$’000 – – – – – – 15,105 132,715 274,934 422,754	Fair value adjustment on project under development HK$’000 900,000 82,156 – (55,952) – 926,204 90,362 (132,715) – 883,851	Fair value adjustments on certain non-current assets HK$’000 – 709 28,212 (6,714) (487) 21,720 2,061 – (1,026) 22,755	Total HK$’000 900,000 82,865 28,212 (62,666) (487)
						947,924 107,528 – 273,908
						1,329,360

At 31 March 2008, the Group has unused tax losses of approximately HK$942,000,000 (2007: HK$1,001,000,000) available for offset against future taxable profits. A deferred tax asset has been recognised in respect of approximately HK$25,000,000 (2007: HK$24,000,000) of such losses. No deferred tax asset in respect of the remaining tax losses has been recognised due to the unpredictability of future profit streams on those subsidiaries. The unused tax losses may be carried forward indefinitely.

At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognised was approximately HK$21,000,000 (2007: Nil). No liability has been recognised in respect of these differences because the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

44. SHARE CAPITAL

Ordinary shares of HK$0.10 each Authorised: At 1 April 2006, 31 March 2007 and 31 March 2008 Issued and fully paid: At 1 April 2006 Issue of new shares Issue of new shares pursuant to scrip dividend schemes Issue of shares under share option scheme Shares repurchased At 31 March 2007 Issue of new shares pursuant to scrip dividend schemes Issue of shares under share option scheme Shares repurchased At 31 March 2008	Number of shares 3,000,000,000 1,378,799,910 68,500,000 9,838,497 36,575,000 (2,000,000) 1,491,713,407 6,594,110 10,620,000 (1,834,000) 1,507,093,517	Value HK$’000 300,000

		137,880 6,850 984 3,657 (200)
		149,171 659 1,062 (183)
		150,709

During the year, the following changes in the Company’s share capital took place:

(a) Pursuant to the scrip dividend schemes which were announced by the Company on 11 October 2007 and 21 January 2008, the Company issued 5,647,266 (2007: 6,523,256) and 946,844 (2007: 3,315,241) new ordinary shares of HK$0.1 each in the Company to shareholders who elected to receive scrip dividends in respect of the final dividend for the year ended 31 March 2007 and the interim dividend for the six months ended 30 September 2007 respectively. These shares rank pari passu with the then existing shares in all respects.
(b) During the year, the Company issued 10,620,000 ordinary shares of HK$0.10 each at the subscription price ranging from HK$1.50 to HK$3.00 under the share option scheme of the Company.
(c) The Company repurchased a total of 1,834,000 ordinary shares through the Hong Kong Stock Exchange as follows:

				Aggregate
	Ordinary shares	Price per share		consideration
Month of purchase	of HK$0.1 each	Highest	Lowest	paid
		HK$	HK$	HK$’000
July 2007	1,834,000	3.48	3.42	6,137

45. SHARE-BASED PAYMENT TRANSACTIONS

On 27 August 2002, the Company adopted a share option scheme (the “Share Option Scheme”) for the purpose of providing incentive or reward to any employees, executives or officers, directors of the Group or any invested entity and any celebrity, consultant, adviser or agent of any member of the Group or any invested entity, who have contributed or will contribute to the growth and development of the Group or any invested entity (“Eligible Person”). The Share Option Scheme will remain in force for a period of ten years from that date.

Under the Share Option Scheme, the directors of the Company may at their discretion grant options to any Eligible Person to subscribe for shares in the Company without consideration. The directors may at their discretion determine the specific exercise period which should expire in any event no later than ten years from date of adoption of the Share Option Scheme. The exercise price is determined by the directors of the Company and will be at least the higher of: (i) the subscription price as is permissible under the Listing Rules from time to time; and (ii) the nominal value of the Company’s shares.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

The maximum number of shares which may initially be issued upon the exercise of all options to be granted under the Share Option Scheme and any other share option scheme(s) adopted by the Company must not in aggregate exceed 10% of the total number of issued shares of the Company as at its adoption date, i.e. 103,674,492 shares. Subject to the approval of the shareholders of the Company in general meeting, the limit may be refreshed to 10% of the total number of shares in issue as at the date of approval by the shareholders of the Company in general meeting. Notwithstanding the foregoing, the maximum number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option scheme(s) of the Company must not in aggregate exceed 30% of the total number of shares in issue from time to time. Pursuant to an ordinary resolution passed at the annual general meetings of the Company in 2003, 2004, 2005 and 2006, the 10% scheme limit was refreshed to 10% of the total number of issued shares of the Company as at the respective date of such meetings. Pursuant to an ordinary resolution passed at the Company’s annual general meeting held on 20 September 2007, the 10% scheme limit was further refreshed to 149,780,440 representing 10% of the total number of issued shares of the Company as at the date of such meeting.

The maximum number of shares of the Company in respect of which options may be granted to each Eligible Person under the Share Option Scheme and any other share option scheme(s) of the Company (including both exercised, cancelled and outstanding options) in any 12-month period shall not exceed 1% of the total number of shares in issue from time to time unless such grant has been duly approved by shareholders of the Company at general meeting at which the Eligible Person and his associates (as defined in the Listing Rules) abstained from voting. Options granted to a substantial shareholder and/or an independent non-executive director or any of their respective associates (as defined in the Listing Rules) in any 12-month period in excess of 0.10% of total number of shares in issue and have an aggregate value exceeding HK$5,000,000 must be approved by the shareholders of the Company in general meeting in advance.

(a) Details of the share options granted on 28 December 2004 to certain directors and advisors of the Company under the Share Option Scheme and movements in such holdings during the year are as follows:

Exercise Date of Exercise price grant period per share HK$ 28.12.2004 28.12.2004 to 26.8.2012 1.24 28.12.2004 28.12.2004 to 26.8.2012 1.50			Number of shares of the Company to be issued upon exercise of the share options	Number of shares of the Company to be issued upon exercise of the share options	Number of shares of the Company to be issued upon exercise of the share options
		Outstanding at 1.4.2006 22,100,000 22,100,000 44,200,000	Exercised during the year (13,650,000) (9,520,000) (23,170,000)	Outstanding at 31.3.2007 8,450,000 12,580,000 21,030,000	Exercised during the year – (350,000) (350,000)	Outstanding at 31.3.2008 8,450,000 12,230,000
						20,680,000

Pursuant to the ordinary resolution passed by the Company’s shareholders at the special general meeting held on 14 February 2006, the Company repriced the share options by a reduction of the exercise price by HK$0.70 per share to take into account of the payment of a special cash dividend of HK$0.70 per share during the year ended 31 March 2006.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

(b) Details of the share options granted to certain directors, employees and advisors of the Group under the Share Option Scheme during the period from 1 April 2006 to 31 March 2008 and movements in such holdings are as follows:

	Num	ber of shares o	f the Company	to be issued up	on exercise of t	he share options	he share options
Outstanding at 1.4.2006 8,311,000 8,325,000 8,325,000 8,325,000 3,000,000 3,000,000 3,000,000 3,000,000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 45,286,000	Granted during the year ended 31.3.2007 – – – – – – – – 4,600,000 4,600,000 4,600,000 1,300,000 4,750,000 1,500,000 1,500,000 1,500,000 1,500,000 2,750,000 2,000,000 1,300,000 2,500,000 1,020,000 1,190,000 1,190,000 – – – – – – – – – – – – –	Exercised during the year ended 31.3.2007 (8,286,000) (895,000) – – (2,874,000) (50,000) – – – – – – (1,300,000) – – – – – – – – – – – – – – – – – – – – – – – –	Lapsed during the year ended 31.3.2007 (25,000) (275,000) (650,000) (650,000) (126,000) – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –	Outstanding at 31.3.2007 – 7,155,000 7,675,000 7,675,000 – 2,950,000 3,000,000 3,000,000 4,600,000 4,600,000 4,600,000 1,300,000 3,450,000 1,500,000 1,500,000 1,500,000 1,500,000 2,750,000 2,000,000 1,300,000 2,500,000 1,020,000 1,190,000 1,190,000 – – – – – – – – – – – – –	Granted during the year ended 31.3.2008 – – – – – – – – – – – – – – – – – – – – – – – – 1,500,000 9,000,000 6,000,000 550,000 450,000 450,000 3,900,000 3,900,000 3,900,000 250,000 150,000 150,000 200,000	Exercised during the year ended 31.3.2008 – (1,449,000) – – – (1,421,000) – – (4,600,000) – – – (2,550,000) – – – – – – – – (250,000) – – – – – – – – – – – – – – –	Lapsed during the year ended 31.3.2008 – (5,706,000) (75,000) (75,000) – (1,529,000) (375,000) (375,000) – – – – (900,000) – – – – (900,000) (1,200,000) – (2,500,000) (770,000) – – – – – – – – – – – – – – –	Outstanding at 31.3.2008 – – 7,600,000 7,600,000 – – 2,625,000 2,625,000 – 4,600,000 4,600,000 1,300,000 – 1,500,000 1,500,000 1,500,000 1,500,000 1,850,000 800,000 1,300,000 – – 1,190,000 1,190,000 1,500,000 9,000,000 6,000,000 550,000 450,000 450,000 3,900,000 3,900,000 3,900,000 250,000 150,000 150,000 200,000
	37,800,000	(13,405,000)	(1,726,000)	67,955,000	30,400,000	(10,270,000)	(14,405,000)	73,680,000

				25,275,000				44,665,000

During the year, the Company granted 30,400,000 share options to directors and employees at exercise prices ranging from HK$3.00 to HK$4.50. The fair value of the share options granted during the year is approximately HK$9,125,000. The share options granted are subject to vesting conditions from zero to two years.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

The fair values determination at the grant date were carried out by RHL Appraisal Limited using the BlackScholes Option Pricing Model (the “Model”). The key inputs into the Model were summarised as follows:

Options granted during the year

	Type	Type	Type	Type	Type	Type	Type	Type	Type	Type	Type	Type	Type
	(xxv)	(xxvi)	(xxvii)	(xxviii)	(xxix)	(xxx)	(xxxi)	(xxxii)	(xxxiii)	(xxxiv)	(xxxv)	(xxxvi)	(xxxvii)
		(Note)	(Note)
Closing share price
at date of grant
(HK$)	3.47	3.39	3.39	3.30	3.30	3.30	2.98	2.98	2.98	3.00	3.00	3.00	3.00
Expected volatility	45%	45%	45%	41%	41%	41%	41%	41%	41%	41%	41%	41%	41%
Expected life
(year)	1	1	2	1	2	3	1	2	3	1	1	2	3
Risk-free interest rate	3.942%	3.870%	3.880%	3.880%	3.959%	4,105%	3.840%	3.837%	3.898%	3.710%	3.710%	3.798%	3.881%
Expected annual
dividend yield	0.86%	0.88%	0.88%	0.91%	0.91%	0.91%	1.01%	1.01%	1.01%	1.00%	1.00%	1.00%	1.00%
Fair value per share
option_(HK$)_	0.703	0.590	–	0.497	0.591	0.667	0.323	0.548	0.725	0.522	0.522	0.571	0.616

Note: Included in type (xxvi) and type (xxvii) are 8,000,000 and 6,000,000 options, respectively, granted to advisors of the Group for which services are not yet received before the balance sheet date.

The expected volatility used in the Model was determined by using the annualised standard derivation of the continuously compounded rate of return on the ordinary shares of the Company. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non transferability and behavioural considerations.

The amount of cost of share options charged to the consolidated income statement during the year was HK$15,170,000 (2007: HK$21,995,000).

In respect of the share options granted during the year, the closing share price immediately before date of grant is ranged from HK$2.90 to HK$3.49.

In respect of the 10,620,000 share options exercised during the year, the weighted average share price at the date of exercise is HK$3.26 and the weighted average closing price at the date immediately before exercise date is HK$3.25.

There was no consideration received during the year from Eligible Persons for taking up the options granted.

Share option scheme of Paul Y. Engineering Group Limited (“PYE”)

On 7 September 2005, PYE adopted a share option scheme (the “PYE Scheme”) for the purpose of providing incentive or reward to any employees, executives or directors of PYE and its subsidiaries or any invested entity and any consultant, adviser or agent of any member of PYE and its subsidiaries or any invested entity, who have contributed or will contribute to the growth and development of PYE and its subsidiaries or any invested entity (“PYE Eligible Person”). The PYE Scheme will remain in force for a period of ten years from that date.

Under the PYE Scheme, the directors of PYE may at their discretion grant options to any PYE Eligible Person to subscribe for shares in PYE. Consideration to be paid on each grant of option is HK$1.00. The directors of PYE may at their discretion determine the specific exercise period which should expire in any event no later than ten years from date of adoption of the PYE Scheme. The exercise price is determined by the directors of PYE and will be at least the higher of: (i) the subscription price as is permissible under the Listing Rules from time to time; and (ii) the nominal value of the shares of PYE.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

The maximum number of shares that may initially be issued upon the exercise of all options to be granted under the PYE Scheme and any other share option scheme(s) adopted by PYE must not in aggregate exceed 10% of the total number of issued shares of PYE, i.e. 57,669,939 shares of PYE, as at its adoption date. Subject to the approval of the shareholders of PYE in general meeting, the limit may be refreshed to 10% of the total number of shares of PYE in issue as at the date of approval by the shareholders of PYE in general meeting. Notwithstanding the forgoing, the maximum number of shares of PYE which may be issued upon exercise of all outstanding options granted and yet to be exercised under the PYE Scheme and any other share option scheme(s) of PYE must not in aggregate exceed 30% of the total number of shares of PYE in issue from time to time. Pursuant to an ordinary resolution passed at PYE’s annual general meeting held on 4 September 2007, the 10% scheme limit was refreshed to 59,159,910, representing 10% of the total number of issued shares of PYE as at the date of such meeting.

The maximum number of shares of PYE in respect of which options may be granted to each PYE Eligible Person under the PYE Scheme and any other share option scheme(s) of PYE (including both exercised, cancelled and outstanding options) in any 12-month period shall not exceed 1% of the total number of shares of PYE in issue from time to time unless such grant has been duly approved by shareholders of PYE in general meeting at which the PYE Eligible Person and his associate (as defined in the Listing Rules) abstained from voting. Options granted to a substantial shareholder and/or an independent non-executive director of PYE or any of their respective associates (as defined in the Listing Rules) in any 12-month period in excess of 0.10% of the total number of shares of PYE in issue and have an aggregate value exceeding HK$5,000,000 must be approved by the shareholders of PYE in general meeting in advance.

Details of movements in share options of PYE granted under the PYE Scheme during the current and prior years are as follows:

	Num	ber of shares o	f the Company	to be issued up	on exercise of t	he share options	he share options
Outstanding at 1.4.2006 1,500,000 1,500,000 1,500,000 8,000,000 – – – – – – – – – 12,500,000	Granted during the year ended 31.3.2007 – – – – 3,000,000 3,000,000 2,000,000 – – – – – –	Exercised during the year ended 31.3.2007 – – – – (1,500,000) – – – – – – – –	Lapsed during the year 31.3.2007 – – – (2,400,000) – – – – – – – – –	Outstanding at 31.3.2007 1,500,000 1,500,000 1,500,000 5,600,000 1,500,000 3,000,000 2,000,000 – – – – – –	Granted the year ended 31.3.2008 – – – – – – – 1,500,000 1,500,000 13,000,000 2,000,000 1,000,000 600,000	Exercised during the year ended 31.3.2008 (1,000,000) (1,000,000) – – (1,286,000) – – – – – – – –	Lapsed during the year ended 31.3.2008 – – (1,000,000) (2,800,000) – (1,500,000) – – – (1,700,000) – – –	Outstanding at 31.3.2008 500,000 500,000 500,000 2,800,000 214,000 1,500,000 2,000,000 1,500,000 1,500,000 11,300,000 2,000,000 1,000,000 600,000
	8,000,000	(1,500,000)	(2,400,000)	16,600,000	19,600,000	(3,286,000)	(7,000,000)	25,914,000

				4,500,000				20,814,000

In respect of the 3,286,000 share options exercised during the year, the weighted average share price at the date of exercise is HK$1.30.

In respect of the share options granted during the year, the closing share price immediately before date of grant is ranged from HK$1.33 to HK$1.36.

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

The fair values of the share options granted were calculated using the Model carried out by Greater China Appraisal Limited and RHL Appraisal Limited. The inputs into the Model were summarised as follows:

Closing share price at date of grant_(HK$) Expected volatility Expected life(year) Risk-free interest rate Expected annual dividend yield Fair value per share option(HK$)_	Granted during theyear
	Type Type Type Type Type Type VIII IX X XI XII XIII 1.31 1.31 1.31 1.32 1.40 1.40 52% 52% 52% 49% 51% 51% 0.6 1.5 1.2 1.1 1.0 1.0 4.06% 4.33% 4.32% 4.29% 2.54% 2.54% 6.87% 6.87% 6.87% 6.82% 6.43% 6.43% 0.180 0.272 0.255 0.217 0.244 0.244

The Model is one of the commonly used models to estimate the fair value of the option. The value of an option varies with different variables of certain subjective assumptions. Any changes in the variables so adopted may materially affect the estimation of the fair value of an option.

The expected volatility used in the Model was determined by using the annualised standard deviation of the continuously compounded rate of return on the ordinary shares of PYE. The expected life used in the Model has been adjusted, based on management’s best estimate, for the effects of non transferability and behavioural considerations.

The total estimated fair value of approximately HK$4,697,000 (2007: HK$1,088,000) with respect to share options granted to directors and employees of PYE were charged to the consolidated income statement during the year.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

46. ACQUISITION OF SUBSIDIARIES

(a) Pursuant to an agreement dated 12 May 2006 (the “Agreement”), the Group acquired from an independent third party assets and gas and oil logistics and distribution operations across Wuhan, the PRC, at a total consideration of approximately RMB470 million. This transaction had been completed in September 2006 and had been accounted for using the purchase method of accounting during the year ended 31 March 2007. The net assets acquired in the transaction was summarised as follows:

Net assets acquired: Property, plant and equipment Premium on leasehold land Other intangible assets – rights of operation Other intangible assets – customer base Prepaid lease payments Deferred tax liability Discount on acquisition of business Satisfied by: Cash consideration paid Transaction costs paid Deferred consideration payable_(Note)_ Unsettled transaction costs included in creditors and accrued expenses Net cash outflow arising on acquisition: Cash consideration and transaction costs paid	Carrying amount before business combination HK$’000 419,317 – – – 45,522 – 464,839	Fair value adjustments HK$’000 38,327 9,210 35,923 2,032 – (28,212) 57,280	Fair value HK$’000 457,644 9,210 35,923 2,032 45,522 (28,212) 522,119 (3,755) 518,364 344,828 24,434 118,227 30,875 518,364 369,262

Note: Pursuant to the Agreement, part of the consideration (RMB120 million) will be settled by way of issue of the 3-year, zero coupon, HK$ denominated convertible notes by the Company at a conversion price of HK$4.25 per share. Upon maturity, the redemption amount is 114.167% of the par value. As at 31 March 2007, the convertible notes have not yet issued and the unpaid consideration of HK$121,213,000 is presented as deferred consideration payable in consolidated balance sheet. As the Group has no obligations to settle the unpaid consideration within twelve months of the balance sheet date, the amount is classified as non-current liabilities.

During the current year, an amount of approximately HK$121,521,000 (equivalent to RMB120 million) convertible notes have been issued and details of convertible notes are set out in note 42.

The business acquired during the year ended 31 March 2007 recorded a loss of HK$8,702,000 between the date of acquisition and 31 March 2007.

(b) On 11 June 2007, the Group acquired the entire interest in PY Property Consultants Limited (formerly known as Fexon Property Consultants Limited), PY (Asia Pacific) Limited (formerly known as China Land (Asia Pacific) Limited) and PY Investments (Samoa) Limited (formerly known as Fexon Investments Limited) (the “Acquirees”), which are engaged in the provision of property consultancy services, at a consideration of HK$1,793,000. The acquisition was accounted for using the purchase method of accounting. The amount of goodwill arising as a result of this acquisition is approximately HK$2,323,000.

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Net assets acquired: Debtors, deposits and prepayments Bank balances and cash Creditors and accrued expenses Taxation payable Goodwill Consideration Net cash outflow arising on acquisition of subsidiaries: Bank balances and cash acquired Cash consideration paid	2008 HK$’000 (Note) 1,290 1 (1,628) (193) (530) 2,323 1,793 1 (1,793) (1,792)

Note: Carrying amount of the Acquirees’ net assets acquired before combination is the same as its fair value.

The goodwill on acquisition represents the value obtainable from synergies with the Group on the economy of scale on the property development management services of the Group.

The subsidiaries acquired did not have any significant impact on the Group’s results and cash flows for the year ended 31 March 2008.

If the acquisition had been completed on 1 April 2007, total group revenue and profit for the period would approximate the amounts disclosed in the consolidated income statement.

47. ACQUISITION OF ASSETS THROUGH ACQUISITION OF SUBSIDIARIES

During the year, the Group acquired two subsidiaries from certain independent third parties which are mainly holding an investment property for rental purpose for a consideration of approximately HK$47,109,000. The acquisition has been accounted for as an acquisition of assets and liabilities. The effect of the acquisition is summarised as follows:

Net assets acquired: Investment properties Debtors, deposits and prepayments Bank balances and cash Creditors and accrued expenses Bank and other borrowings Consideration Net cash outflow arising on acquisition of assets through a subsidiary Bank balances and cash acquired Cash consideration paid Net cash outflow	2008 HK$’000 118,549 1,066 990 (2,056) (71,440) 47,109 990 (47,109) (46,119)

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

48. MAJOR NON-CASH TRANSACTIONS

The Group had the following major non-cash transactions:

(a) New shares were issued as scrip dividends for the years ended 31 March 2008 and 2007 as set out in notes 15 and 44.
(b) During the year ended 31 March 2007, the Company issued and allotted 68,500,000 ordinary shares for the acquisition of additional interests in subsidiaries; and
(c) During the year ended 31 March 2007, the Company declared a special dividend by way of distribution of the value derived from the Group’s divestment of an associate. The amount distributed was approximately HK$325,660,000.

49. RETIREMENT BENEFIT SCHEMES

The Group operates defined contribution retirement benefit schemes for qualifying employees. The assets of the schemes are separately held in funds under the control of trustees.

The employees of the Group’s PRC subsidiaries are members of the state-managed retirement benefit schemes operated by the PRC government. The subsidiaries in the PRC are required to contribute a specified percentage of their payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions.

The cost charged to the consolidated income statement represents contributions paid and payable to the funds by the Group at rates specified in the rules of the schemes. Where there are employees who leave the schemes prior to vesting fully in the contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions.

At the balance sheet date, there were no material forfeited contributions which arose upon employees leaving the schemes prior to their interests in the Group’s contributions becoming fully vested and which are available to reduce the contributions payable by the Group in future years.

With effective from 1 December 2000, the Group has joined a mandatory provident fund scheme (“MPF Scheme”). The MPF Scheme is registered with the Mandatory Provident Fund Scheme Authority under the Mandatory Provident Fund Schemes Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of an independent trustee. Under the rules of the MPF Scheme, the employer and its employees are each required to make contributions to the scheme at the rates specified in the rules. The only obligation of the Group with respect to MPF Scheme is to make the required contributions under the scheme. No forfeited contribution is available to reduce the contribution payable in the future years.

The retirement benefit scheme contributions arising from the MPF Scheme charged to the consolidated income statement represent contributions paid and payable to the funds by the Group at the rates specified in the rules of the scheme.

During the year, the total retirement benefit scheme contributions charged to consolidated income statement amounted to approximately HK$15,152,000 (2007: HK$10,582,000).

50. CONTINGENT LIABILITIES

	2008	2007
	HK$’000	HK$’000
Guarantee given to a bank in respect of
banking facilities granted to an associate	10,481	9,454

At the initial date of providing this guarantee, the directors consider that the fair value of the financial guarantee is insignificant.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

51. OPERATING LEASE COMMITMENTS

(a) The Group as a lessee

At the balance sheet date, the Group had commitments for future minimum lease payments under noncancellable operating leases in respect of rented premises which fall due as follows:

Within one year In the second to fifth year inclusive Over five years	2008 HK$’000 30,785 33,264 4,397 68,446	2007 HK$’000 29,766 49,155 4,449
		83,370

Leases are negotiated, and monthly rentals are fixed, for terms ranging from two to thirty years.

(b) The Group as a lessor

At the balance sheet date, the Group had contracted with tenants in respect of its investment properties for future minimum lease payments which fall due as follows:

Within one year In the second to fifth year inclusive	2008 HK$’000 2,693 3,656 6,349	2007 HK$’000 – –
		–

Operating lease arrangements represent rentals receivable by the Group for certain of its premises. Leases are negotiated for terms ranging from 1 year to 6 years.

52. PLEDGE OF ASSETS

At the balance sheet date, the following assets were pledged to banks and financial institutions to secure the general credit facilities granted to the Group:

Investment properties Property, plant and equipment Prepaid lease payments Bank deposits Intangible assets Project under development Properties under development	2008 HK$’000 149,667 482,195 49,836 34,269 9,981 17,007 172,863 915,818	2007 HK$’000 – 467,615 35,268 42,601 7,827 24,137 66,834
		644,282

In addition, the Group’s benefits under certain construction contracts were pledged to secure the facilities granted.

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

53. COMMITMENTS

Expenditure contracted for but not provided in the consolidated financial statements in respect of acquisition of: – Property, plant and equipment – Project under development – Properties under development	2008 HK$’000 279,066 449,536 425,995 1,154,597	2007 HK$’000 274,986 1,146,837 98,044
		1,519,867

54. RELATED PARTY DISCLOSURES

(a) The Group entered into the following significant transactions with certain related parties during the year:

Class of related party	Nature of transactions	2008	2007
		HK$’000	HK$’000
Associates of the Group	Purchase of concrete products by the Group	–	35
	Interest income charged by the Group	1,170	8,400
	Rentals and related building management fee
	charged to the Group	5,974	24,958
	Rentals and consultancy fee charged by the Group	401	2,511
	Building manager remuneration fee charged
	by the Group	243	1,200
	Project management fees charged to the Group	–	8,445
	Project management fees charged by the Group	28,874	1,596
	Net rental guarantee income charged by
	the Group	713	1,438
Jointly controlled entities	Subcontracting fees charged to the Group	3,861	7,798
of the Group	Service fees charged by the Group	17	30
Subsidiaries of ITC	Purchase of building materials by the Group	–	40
	Carpark rental charged by the Group	32	48
	Interest income charged by the Group	1,922	5,339
	Interest charged to the Group	3,517	417
	Coupon interest of bonds entitled
	by the Group	95	582
	Rentals charged to the Group	360	360
	Face value of bonds subscribed by the Group	–	36,858
	Motor vehicles rental charged to the Group	190	219
Associates of ITC	Interest income charged by the Group	16,151	13,461
	Interest charged to the Group	1,691	981
	Service fees charged by the Group	166	109
	Service fees charged to the Group	1,439	736
	Carpark rental fee charged by the Group	61	–
	Coupon interest of bonds entitled by the Group	643	–
Other related companies	Rental and related building management fee
(Note)	charged by the Group	48	17
	Interest income charged by the Group	–	925
	Service fees charged to the Group	1,509	1,253
	Service fees charged by the Group	136	305
Company which a member	Acquisition of additional interests in subsidiaries
of key management is a	by the Group	–	199,551
shareholder

Note: Dr Chan has significant influence over these related companies.

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

(b) The remuneration of directors and other members of key management, which is determined by the remuneration committee having regard to the performance of individuals and market trends, is as follows:

Short-term benefits Post-employment benefits Share-based payment expense	2008 HK$’000 22,673 562 10,461 33,696	2007 HK$’000 20,451 557 11,698
		32,706

Details of the share options granted to the directors during the year are set out below:

Exercise price per Name of director Date of grant Exercise period share HK$ Lau Ko Yuen, Tom 28.12.2004 28.12.2004 to 26.08.2012 1.24 28.12.2004 28.12.2004 to 26.08.2012 1.50 08.09.2006 08.09.2006 to 07.09.2007 2.48 08.09.2006 08.09.2007 to 07.09.2008 2.48 08.09.2006 08.09.2008 to 07.09.2009 2.48 18.09.2007 18.09.2007 to 17.09.2008 3.546 18.09.2007 18.09.2008 to 17.09.2009 3.546 18.09.2007 18.09.2009 to 17.09.2010 3.546 Kwok Shiu Keung, 28.12.2004 28.12.2004 to 26.08.2012 1.24 Ernest 28.12.2004 28.12.2004 to 26.08.2012 1.50 Chan Shu Kin 28.12.2004 28.12.2004 to 26.08.2012 1.24 28.12.2004 28.12.2004 to 26.08.2012 1.50 Leung Po Wing, 08.09.2006 08.09.2006 to 26.08.2012 2.43 Bowen Joseph Li Chang An 06.02.2007 06.02.2007 to 26.08.2012 3.00	Outstanding as at 1.4.2007 6,500,000 6,500,000 4,600,000 4,600,000 4,600,000 – – – 650,000 650,000 650,000 650,000 1,300,000 1,300,000 32,000,000	Granted during the year – – – – – 3,900,000 3,900,000 3,900,000 – – – – – – 11,700,000	Exercised during the year – – (4,600,000) – – – – – – – – – – – (4,600,000)	Outstanding as at 31.3.2008 6,500,000 6,500,000 – 4,600,000 4,600,000 3,900,000 3,900,000 3,900,000 650,000 650,000 650,000 650,000 1,300,000 1,300,000
				39,100,000

Details of the balances with associates, jointly controlled entities, related companies and minority shareholders at the balance sheet date are set out in notes 27, 28, 29, 38, 39 and 40.

55. BALANCE SHEET OF THE COMPANY

Assets Liabilities CAPITAL AND RESERVES Share capital Reserves_(Note)_ SHAREHOLDERS’ FUNDS	2008 HK$’000 3,027,107 (1,188,291) 1,838,816 150,709 1,688,107 1,838,816	2007 HK$’000 2,721,326 (983,761)
		1,737,565

		149,171 1,588,394
		1,737,565

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Note:

At 1 April 2006 Share repurchased and cancelled Issue of shares under scrip dividend schemes Credit arising on scrip dividends Share issue expenses Recognition of equity-settled share-based payment expense Issue of shares under share option scheme Issue of shares upon acquisition of additional interests in subsidiaries Release upon lapse of vested share options Loss for the year Distribution At 31 March 2007 Share repurchased and cancelled Issue of shares under scrip dividend schemes Credit arising on scrip dividends Share issue expenses Recognition of equity-settled share-based payment expense Issue of shares under share option scheme Recognition of equity component of convertible notes Release upon lapse of vested share options Profit for the year Distribution At 31 March 2008	Share premium HK$’000 169,129 (4,181) (984) – (635) – 59,597 192,701 – – – 415,627 (5,954) (659) – (388) – 30,088 – – – – 438,714	Convertible notes reserve HK$’000 – – – – – – – – – – – – – – – – – – 8,482 – – – 8,482	Share- based payment reserve HK$’000 4,940 – – – – 22,181 (5,096) – (63) – – 21,962 – – – – 15,478 (5,095) – (4,085) – – 28,260	Retained profits HK$’000 1,505,813 – – 24,477 – – – – 63 (9,880) (369,668) 1,150,805 – – 18,509 – – – – 4,085 84,305 (45,053) 1,212,651	Total HK$’000 1,679,882 (4,181) (984) 24,477 (635) 22,181 54,501 192,701 – (9,880) (369,668)
					1,588,394 (5,954) (659) 18,509 (388) 15,478 24,993 8,482 – 84,305 (45,053)
					1,688,107

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

56. PARTICULARS OF PRINCIPAL SUBSIDIARIES, ASSOCIATES AND JOINTLY CONTROLLED ENTITIES

(a) Principal subsidiaries

Particulars of the Company’s principal subsidiaries at 31 March 2008 are as follows:

		Issued and		Percentage of issued	Percentage of issued
		fully paid		share capital/
	Place of	share capital/		registered capital
	incorporation/	registered	held	by the	attributable
Name	registration	capital	Subsidiaries		to the	Group	Principal activities
			2007	2008	2007	2008
			%	%	%	%
China Earth Limited	Hong Kong	HK$1	–	100	–	62.92	Investment holding
		ordinary share
Corless Limited	British Virgin	US$2	100	100	63.74	62.92	Investment holding
	Islands	ordinary shares
Glory Well Limited	Hong Kong	HK$10,000	100	100	100	100	Investment holding
		ordinary shares
Jiangsu Wanhua Real	PRC	US$8,800,000	100	100	100	100	Property investment
Estate Development		registered capital
Co., Ltd.		(Note (i))
Jiangsu YangKou Port	PRC	US$66,650,000	75	75	75	75	Port development
Development and		registered capital
Investment Co., Ltd.		(Notes (ii) and (vi))
Jiangsu Yangtong Investment	PRC	US$13,332,000	75	75	75	75	Port development
and Development Co., Ltd.		registered capital
		(Note (ii))
湖北民生環保能源技術發展	PRC	US$4,300,000	–	100	–	100	LPG technical
有限公司		registered capital					development
		(Notes (i) and (vi))
湖北民生石油液化氣	PRC	US$41,000,000	100	100	100	100	LPG distribution
有限公司		registered capital					and logistics
		(Notes (i) and (vi))
Nation Cheer Investment	Hong Kong	HK$1,200,000	100	100	100	100	Securities investment
Limited		ordinary shares
Paul Y. Building Materials	Hong Kong	HK$2	100	100	63.74	62.92	Trading and installation
Company Limited		ordinary shares					of building materials
Paul Y. Corporation Limited	Hong Kong	HK$2	100	100	100	100	Investment holding
		ordinary shares
Paul Y. - CREC (HK)	Hong Kong	–	60	60	38.24	37.75	Civil engineering
Joint Venture		(Note (iii))

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

		Issued and		Percentage of issued	Percentage of issued
		fully paid		share capital/
	Place of	share capital/		registered capital
	incorporation/	registered	held	by the	attributable
Name	registration	capital	Subsidiaries		to the	Group	Principal activities
			2007	2008	2007	2008
			%	%	%	%
Paul Y. (E & M) Contractors	Hong Kong	HK$20,000,000	99.9998	99.9998	63.74	62.92	Provision of
Limited		ordinary shares					electrical,
							mechanical and
							building services
Paul Y. Builders Group	Hong Kong	HK$2	100	100	63.74	62.92	Investment holding
Limited		ordinary shares
		HK$1,000,000	–	–	–	–
		non-voting
		deferred shares
		(Note (iv))
Paul Y. Builders Limited	Hong Kong	HK$102,000,000	100	100	63.74	62.92	Building construction
		ordinary shares
Paul Y. Construction &	Hong Kong	HK$42,000,000	100	100	63.74	62.92	Building construction
Engineering Co. Limited		ordinary shares					and specialist works
Paul Y. Engineering	Bermuda	HK$298,649,000	63.74	62.92	63.74	62.92	Investment holding
Group Limited		ordinary shares
Paul Y. General Contractors	Hong Kong	HK$36,000,000	100	100	63.74	62.92	Civil engineering
Limited		ordinary shares					and building
							construction
Paul Y. Interior Contractors	Hong Kong	HK$2	100	100	63.74	62.92	Interior decoration
Limited		ordinary shares					works
Paul Y. Plant Hire Limited	Hong Kong	HK$2	100	100	63.74	62.92	Hire of motor
		ordinary shares					vehicles and plant
							and machinery
Paul Y. Construction	Hong Kong	HK$2	100	100	63.74	62.92	Civil engineering,
Company, Limited		ordinary shares					building
							construction
							and investment
							holding
		HK$50,000,000	–	–	–	–
		non-voting
		preferred shares
		(Note (v))

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

		Issued and		Percentage of issued	Percentage of issued
		fully paid		share capital/
	Place of	share capital/		registered capital
	incorporation/	registered	held	by the	attributable
Name	registration	capital	Subsidiaries		to the	Group	Principal activities
			2007	2008	2007	2008
			%	%	%	%
Paul Y. Construction	PRC	RMB60,000,000	100	100	63.74	62.92	Civil engineering
(China) Limited		registered capital					and building
		(Note i)					construction
Paul Y. Foundation Holdings	British Virgin	US$1	100	100	63.74	62.92	Investment holding
Limited	Islands	ordinary share
Paul Y. Foundation Limited	Hong Kong	HK$10,000,000	100	100	63.74	62.92	Civil engineering and
		ordinary shares					foundation works
Paul Y. Management	Hong Kong	HK$2	100	100	63.74	62.92	Management and
Limited		ordinary shares					secretarial services
Paul Y. Project Management	Hong Kong	HK$2	100	100	63.74	62.92	Project management
International Limited		ordinary shares					services and
							investment holding
Paul Y. Facilities Management	Hong Kong	HK$2	100	100	63.74	62.92	Facilities management
Co., Limited		ordinary shares					services
PYI Management Limited	Hong Kong	HK$2	100	100	100	100	Management services
		ordinary shares
PYI Min Sheng Investment	Hong Kong	HK$2	100	100	100	100	Investment holding
Limited		ordinary shares
PYI Xingdong Properties	PRC	US$12,500,000	100	100	100	100	Property investment
(Jiangsu) Limited		registered capital
		(Note (i))
PY Properties Group	Hong Kong	HK$1	–	100	–	100	Investment holding
(HK) Limited		ordinary share
浙江美聯置業有限公司	PRC	RMB10,000,000	–	100	–	81.46	Investment holding
		registered capital
		(Note (i))
杭州先鋒科技開發有限公司	PRC	RMB10,000,000	–	100	–	81.46	Property holding
		registered capital
		(Note (i))

All of the above subsidiaries operate in Hong Kong except Jiangsu Wanhua Real Estate Development Co., Ltd., 湖北民生環保能源技術發展有限公司, PYI Xingdong Properties (Jiangsu) Limited, 浙江美聯置業有限公司, 杭州先鋒科技開發有限公司, 湖北民生石油液化氣有限公司, Jiangsu Yangtong Investment and Development Co., Ltd., Jiangsu YangKou Port Development and Investment Co., Ltd. and Paul Y. Construction (China) Limited, all of which operate in the PRC.

All of the above subsidiaries are limited companies except Paul Y. - CREC (HK) Joint Venture which is an unincorporated business. Paul Y. Engineering Group Limited is listed in Hong Kong.

Notes:

(i) Being the wholly-foreign-owned-enterprises.
(ii) Being the sino-foreign equity joint ventures.
(iii) No capital has been contributed by the joint venture partners of the joint venture.

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

(iv) The holders of the non-voting deferred shares are not entitled to vote, are not entitled to any dividends for any financial year and are, on winding up or otherwise, only entitled out of the surplus assets of the company to a return of the capital after a total sum of HK$100,000,000,000,000 has been distributed to the holders of the ordinary shares of the company.
(v) The holders of the non-voting preferred shares are not entitled to vote, are not entitled to any dividends unless the net profits of the company available for dividend exceed HK$100,000,000,000 in which case they should be entitled to a fixed non-cumulative dividend at the rate of 5% per annum for any financial year and are, on winding up, only entitled out of the surplus assets of the company to a return of the capital after a total sum of HK$10,000,000,000 has been distributed to the holders of the ordinary shares of the company.
(vi) As at 31 March 2008, the registered capital of Jiangsu YangKou Port Development and Investment Co., Ltd.,湖北民生石油液化氣有限公司 and 湖北民生環保能源技術發展有限公司 are paid up to US$62,654,471, US$30,922,591 and US$3,200,000, respectively. The registered capital of all other subsidiaries registered in the PRC are fully paid up as at 31 March 2008.

(b) Principal associates

Particulars of the Company’s principal associates indirectly held by the Company at 31 March 2008 are as follows:

		Issued and	Percentage of	Percentage of
		fully paid	issued share
	Place of	share capital/	capital/registered
	incorporation/	registered	capital attributable
Name	registration	capital	to the Group		Principal activities
			2007	2008
			%	%
CSCEC - Paul Y. Construction	PRC	US$10,000,000	20.0	19.7	Civil engineering
Company Limited		registered capital			and building
		(Note)			construction
Gain Resources Limited	British Virgin	US$100	15.9	15.7	Investment holding
	Islands	ordinary shares
Nantong Port Group Limited	PRC	RMB966,004,400	45	45	Port operation
		registered capital
		(Note)
Yangtze Feeder Port Limited	Hong Kong	HK$1	–	50	Investment holding
		ordinary share
Zhong Yu - Paul Y. Project	PRC	US$500,000	25.5	25.2	Project management
Management Company Limited		registered capital			and consultancy
		(Note)			services

Note: The company is a sino-foreign equity joint venture.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

(c) Principal jointly controlled entity

Particulars of the Company’s principal jointly controlled entity at 31 March 2008 are as follows:

			Percentage	of
		Issued and	interest
	Place of	fully paid	attributable
Name	incorporation	share capital	to the Group		Principal activities
			2007	2008
			%	%
Paul Y. - Penta-Ocean Joint	Hong Kong	–	31.9	31.5	Civil engineering
Venture		(Note)

Note: No capital has been contributed by the joint venture partners.

The above tables list the subsidiaries, associates and jointly-controlled entity of the Company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries, associates and jointly-controlled entities would, in the opinion of the directors, result in particulars of excessive length.

57. COMPARATIVE INFORMATION

In the current year, revenue excludes sale of securities, which are included in other expenses as decrease in fair value of investments held for trading. In prior years, revenue included gross proceeds from disposal of trading of securities of approximately HK$137,966,000 for 2007. Comparative figures in respect of consolidated income statement and consolidated cash flow statement are restated to conform with current year presentation.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

4. MANAGEMENT DISCUSSION AND ANALYSIS OF THE PYI GROUP FOR THE YEAR ENDED 31 MARCH 2008

Set out below is the management discussion and analysis of PYI Group for the financial years ended 31 March 2007 and 31 March 2008 as extracted from the annual report of PYI for the year ended 31 March 2008.

MANAGEMENT DISCUSSION AND ANALYSIS

REVIEW OF FINANCIAL PERFORMANCE AND POSITION

For the year ended 31 March 2008, the Group recorded a consolidated turnover of about $5,503 million (2007: $4,644 million), representing an increase of about 18% when compared with that of last corresponding year. The increase was mainly attributable to the increase in the Group’s business in management contracting.

The Group’s gross profit increased by 56% to about $427 million (2007: $274 million) as compared with last year. Such gross profit represented a gross margin of 8% (2007: 6%) of the consolidated turnover. Profit before taxation of about $833 million was achieved as compared with about $327 million for the last year. The Group’s profit before taxation was composed of:

(i) net gain of about $129 million in management contracting and property development management businesses (2007: $59 million);
(ii) net gain of about $66 million in port and infrastructure development and logistics business (2007: net loss of $14 million);
(iii) net loss of about $8 million in LPG distribution (2007: net gain of $7 million, including discount on acquisition of LPG business of about $4 million);
(iv) net gain of about $42 million in treasury investment (2007: $84 million);
(v) net gain of about $670 million in property investment (2007: $14 million), including increase in fair value of investment properties of about $669 million (2007: Nil);
(vi) interest income of about $47 million (2006: $42 million);
(vii) gain on disposal of interests in associates of about $4 million (2007: 5 million);
(viii) increase in fair value of derivative financial instruments of about $11 million (2007: Nil);
(ix) net gain of about $56 million (2007: $223 million) from share of results of associates and jointly controlled entities;
(x) net loss in investments held for trading and available-for-sale investments of about $11 million (2007: net gain of about $89 million);
(xi) net corporate and other expenses of about $120 million (2007: $158 million); and
(xii) finance costs of about $53 million (2007: $24 million).

Net profit for the year attributable to the shareholders of PYI was about $360 million (2007: $346 million) and basic earnings per share was 24.0 cents (2007: 23.6 cents). Such improvement was mainly due to the commencement of profit contribution from the port and infrastructure development business in Yangkou Port during the year.

When compared with the Group’s financial position as at last year end, total assets increased by 36% to about $10,361 million (2007: $7,621 million) and net current assets decreased by 83% to about $137 million (2007: $824 million). These changes were mainly attributable to the Group’s further capital expenditure in Yangkou Port. Consequently, current assets decreased from 1.29 times to 1.04 times of current liabilities. After accounting for the net profit of about $360 million net of dividends declared of about $45 million as well as surplus arising from RMB exchange translation of about $221 million, equity attributable to shareholders of PYI increased by 22% to about $3,377 million (2007: $2,772 million), representing $2.24 per share as at 31 March 2008 (2007: $1.86 per share).

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Net cash inflow from operating activities was about $263 million and that from financing activities was about $749 million, and net cash outflow from investing activities was about $1,131 million, resulting in a net decrease in available cash and cash equivalents of about $119 million for the year.

REVIEW OF OPERATIONS

Port and Infrastructure Development and Logistics

It has been more than four years since PYI embarked on the Yangtze Strategy. During this fiscal year, PYI has strengthened its foothold on the Yangtze with promising results.

Yangkou Port

Yangkou Port contributed about $97 million (2007: Nil) to the Group’s operating profit for the period under review. The income was derived from project management and non-exclusive access rights of infrastructure in Yangkou Port.

The 1.4km[2] man-made island was partially completed with 0.3km[2] of land handed over to PetroChina in November 2007 for the building of its LNG facility. The entire man-made island is scheduled for completion at the end of 2008.

The building of the Yellow Sea Crossing progressed well during the period and the last section of the bridge decking was successfully completed in middle of July 2008. It is scheduled for opening to traffic by the end of 2008 and will therefore contribute income from access rights of infrastructure. Other development plans in Yangkou Port were also in good progress. Yangkou Port is expected to commence operations by the end of 2008 as scheduled.

In addition, about 4.16km[2] of our 42km[2] land bank, having reached the formed and serviced stage, obtained the certificate of completion of land reclamation. As a result, this parcel of land has been reclassified as investment properties and revalued and recognised at fair value. As at 31 March 2008, fair value of this 4.16km[2] land parcel was about $1 billion. Net of relevant deferred tax charge of $267 million, a revaluation gain of $638 million was recognised in the income statement.

Reclamation for the final 20km[2] industrial land bank has commenced, with 10km[2] scheduled for completion before the end of 2009.

Highways, railway, canal and other connecting infrastructural and utility associated with Yangkou Port are being developed by others. With the materialization of all the above facilities and plans, Yangkou Port is poised to become a major deep-sea hub port in Eastern China specializing in raw materials, coal, petroleum and chemicals storage and trans-shipment as well as a large scale petrochemical industrial and logistic zone.

In July 2007, our 75% owned Jiangsu YangKou Port Development & Investment Co., Ltd. successfully closed a 7-year project loan facility of RMB960 million with a syndicate of eight domestic banks led by the Industrial and Commercial Bank of China in Nanjing. The successful closure of the syndicated financing not only testified the commercial viability of the project but also cast a vote of confidence in the future prospects of Yangkou Port.

Nantong Port

Nantong Port contributed about $34 million (2007: $5 million) to the Group’s net profit for this year. It recorded a net profit of about $76 million (2006: $54 million) for the year ended 31 December 2007. Improvement in profitability was due to revenue growth as well as successful cost control measures.

Nantong Port recorded an annual cargo throughput of 58 million tons in 2007, representing an increase of 32% year-on-year. The Langshan Phase 3 iron ore terminal also went into commercial operation to become the most modernized trans-shipment hub terminal with the highest throughput capacity and the most modern iron ore terminal on the Yangtze River. Modernization and upgrading programs are underway in other terminals with a view to increase capacity and enhance profitability.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

In January 2008, at the special general meeting shareholders granted a mandate for PYI to participate in the public tendering process and/or exercise its pre-emption right for the 12.32% equity interest held by SDIC Communications Co. in Nantong Port Group Limited. This sale process is expected to be conducted in the second half of 2008. If materialized, the acquisition will increase PYI’s stake in Nantong Port Group to over 50%, thus making Nantong Port Group a PYI subsidiary.

Investment Opportunities in Other Ports on the Yangtze

During the year, PYI has signed various memoranda of understanding for port and logistics investment opportunities along the Yangtze in Chongqing, Yichang, Jiangying, Changzhou, Huzhou and Jiaxing. These opportunities progressed into different stage of negotiations in each respective location. It is expected that some of these major opportunities will be secured in the financial year ending March 2009.

Engineering Business – Paul Y. Engineering

Paul Y. Engineering and its subsidiaries (the “Paul Y. Engineering Group”) achieved turnover of $4,913 million during the year, up 13% compared with last year (2007: $4,359 million). It contributed about $129 million (2007: $59 million) to the Group’s operating profit during the year and proposed a final dividend of 5.5 cents per share, or a pay-out ratio of 45%.

During the year, Paul Y. Engineering Group secured new contracts totalling $1,565 million in aggregate value. Subsequent to the year end, the engineering business secured additional contracts worth $2,313 million.

Paul Y. Engineering Group has moved up the value chain of engineering services for enhanced returns with more in-depth participation in property development and investment in the property market. With the comprehensive skill base from its two business arms namely management contracting and property development management, Paul Y. Engineering Group is now ready to tap opportunities in the property sector. As PYI continues to capture opportunities from port-related property development, the wealth of experience and expertise in large-scale infrastructure projects possessed by Paul Y. Engineering Group will continue to be a solid partner of PYI.

LPG Distribution

Based in Wuhan, PYI’s wholly-owned Minsheng Gas owns and operates the largest LPG terminal and storage facility in Central China. Through its mature wholesale and retail network, Minsheng Gas has captured a 40% share of the Wuhan LPG market for automotive consumption. The LPG distribution business recorded an operating loss of about $8 million (2007: gain of $3 million) for the year. Profitability was affected by the suppressed domestic oil price regime during the year. As a responsible corporate citizen, Minsheng Gas switched to the lower cost domestic LPG in order to mitigate cost. Throughput at the river terminal and the storage tank facilities declined due to decrease in import LPG. At times of negative margin, losses were partly offset by Government subsidy. The situation has recovered and returned to positive margin since the uplift of nation-wide price regime approved by the Central Government in June 2008.

Property Development and Investment

Property investment contributed about $670 million (2007: $14 million) to operating profit for the year, as a result of the gain in fair value of investment properties of $669 million (2007: Nil). The investment properties comprised the 4.16km[2] formed land in Yangkou Port, and a newly acquired industrial investment property in Hangzhou, which gave rise to a revaluation gain of $31 million net of relevant deferred tax charge of $7 million.

Little Yangkou is situated about 35km west of Yangkou Port. Preliminary advance works was underway with a view to develop it as resort and amenity for the Yangkou industrial zone.

“Wanhua Zijin Garden”, a residential property development near Yangkou Port with a gross floor area of 65,000m[2] is approaching partial completion and handover stage.

In Nantong, the Group is developing the Nantong World Trade Centre, a commercial and office complex tower covering a gross floor area of some 65,000m[2] . Development of this property is expected to be completed in late of 2009.

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Treasury Investment

The Treasury investment business contributed about $42 million (2007: $84 million) towards operating profit for the year.

Portfolio of high-yield loans receivable amounted to about $340 million (2007: $469 million), equivalent to about 3% (2007: 6%) of the total assets of the Group.

MATERIAL ACQUISITION AND DISPOSAL

During the year, the Group did not have material acquisition and disposal of subsidiaries and associates.

OUTLOOK

China’s short-term economic trend is clouded by a number of uncertainties including international trade and financial market conditions, domestic austerity program and monetary policy, inflation, high oil and base metal prices as well as impact caused by natural disasters. It is quite pleasing to see that government policies are still strongly in favor of infrastructural investments, particularly in the port and logistics sector.

After five years of dedicated development works, Yangkou Port will be brought from a conceptual stage in 2003 to reality. The official opening of Yangkou Port is scheduled for the end of 2008. That will mark the commencement of operations of the newest deep sea port in Eastern China serving the petrochemical industry as well as acting as a bulk cargo trans-shipment hub for the Yangtze River Region. Having secured PetroChina’s LNG importation facilities at Yangkou Port, the 30km[2] industrial land bank will provide a viable base for sustainable development for many industrial companies in short and medium term. As the anchor of our Yangtze Strategy, Yangkou Port has finally reached a key development stage that it will continue to be a major value driver for PYI for many years to come.

Nantong Port Group is moving on to the third successful year in terms of throughput as well as profitability, with double digit growth year on year. Furthermore, it will serve as a solid base for PYI to embark on the consolidation strategy along the Yangtze River. PYI is determined to capture the investment opportunities built up in recent years and evolve to be a major integrated regional port owner and operator along the Yangtze.

Barring any unforeseen conditions, PYI is optimistic in building critical mass and long-term value with our Yangtze Strategy in the coming year.

MAJOR SUBSEQUENT EVENT

Since the balance sheet date and up to the date of this announcement, there is no major subsequent event.

LIQUIDITY AND CAPITAL RESOURCES

The Group continues to adopt a prudent funding and treasury policy with regard to its overall business operations. A variety of credit facilities are maintained to meet its working capital requirements and committed capital expenditures. The loans of the Group bear interest at market rates and are with terms of repayment ranging from one year to six years. In an effort to minimize the adverse impact of exchange rate and interest rate fluctuations on the Group’s earnings, assets and liabilities, the Group continues to manage the fluctuation exposures on specific transactions.

As at 31 March 2008, the Group’s total borrowings amounted to about $2,046 million (2007: $1,024 million) with $959 million (2007: $597 million) repayable within one year and $1,087 million (2007: $427 million) repayable after one year. Out of the Group’s total borrowings of about $2,046 million, about $204 million was non-recourse to the Group (excluding the Paul Y. Engineering Group).

100

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

As at 31 March 2008, $337 million (2007: $262 million) of the Group’s borrowings bore interest at floating rates and were denominated in Hong Kong dollars, $121 million (2007: Nil) bore interest at fixed rates and were denominated in Hong Kong dollars, $1,362 million (2007: $600 million) bore interest at floating rates and were denominated in Renminbi, and $226 million (2007: $162 million) bore interest at a fixed rate and were denominated in Renminbi. The Group’s gearing ratio was 0.61 (2007: 0.37), which is calculated based on the total borrowings of $2,046 million (2007: $1,024 million) and the Group’s shareholders’ fund of $3,377 million (2007: $2,772 million).

Cash balances at 31 March 2008 amounted to about $636 million (2007: $779 million), of which about $34 million (2007: $43 million) has been pledged to banks to secure general credit facilities granted to the Group. As at 31 March 2008, the Group has a net debt position (being cash balances net of bank borrowings) of $1,143 million (2007: $185 million).

During the year, the Group issued a zero coupon, 3-year convertible note of $122 million at a conversion price of $4.25 per share. Redemption amount will be 114.167% of par value at maturity.

In July 2007, the Group, through its 75% owned subsidiary Jiangsu YangKou Port Development and Investment Co., Ltd., entered into a 7-year project loan facility agreement for RMB960 million with a syndicate of eight domestic banks in Nanjing, the PRC. This syndicated loan, bearing the current Renminbi long-term loan benchmark interest rate as announced by the People’s Bank of China, will be used to fund construction of the 13km Yellow Sea Crossing and the 1.4km[2] man-made island at Yangkou Port. As at 31 March 2008, the Group utilised the syndicated loan in an aggregate amount of RMB600 million.

CONTINGENT LIABILITIES

As at 31 March 2008, the Group has contingent liabilities in respect of guarantee given to a bank for banking facilities given to an associate of about $10 million (2007: $9 million) which was nonrecourse to the Group (excluding the Paul Y. Engineering Group).

PLEDGE OF ASSETS

As at 31 March 2008, certain property, plant and equipment, land and sea use rights, investment property, properties under development and bank deposits of the Group with an aggregate value of about $916 million (2007: $644 million) and benefits under certain construction contracts have been pledged to banks and financial institutions to secure general credit facilities granted to the Group. As at 31 March 2008, about $43 million (2007: $53 million) of these pledged assets were used to secure credit facilities which were non-recourse to the Group (excluding the Paul Y. Engineering Group).

COMMITMENTS

As at 31 March 2008, the Group has expenditure contracted for but not provided for in the consolidated financial statements in respect of acquisition of certain property, plant and equipment, project under development and properties under development in the amount of about $1,155 million (2007: $1,520 million).

NUMBER OF EMPLOYEES AND REMUNERATION POLICIES

Including the directors of the Group, as at 31 March 2008, the Group employed 2,054 full time employees (2007: 1,927). Remuneration packages consisted of salary as well as performance-based and equity-based bonuses.

Further, PYI has implemented three share-related incentive schemes to provide alternative means to motivate employees and promote their loyalty in line with the Group’s strategy. Such schemes aim at providing incentives to motivate the Group’s staff in both Hong Kong and the Mainland.

101

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

5. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE PYI GROUP FOR THE YEAR ENDED 31 MARCH 2007

Set out below is the audited consolidated financial statements of PYI Group for the financial years ended 31 March 2006 and 31 March 2007 together with the relevant notes to the accounts, as extracted from the annual report of PYI for the year ended 31 March 2007.

Consolidated Income Statement

For the year ended 31 March 2007

Notes Turnover 7 Cost of sales Gross profit Other income 9 Administrative expenses Distribution costs Other expenses 10 Finance costs 11 Gain on disposal of interest in an associate Discount on acquisition of business 45 Gain on disposal of subsidiaries Reversal of impairment loss on interest in an associate Share of results of associates Share of results of jointly controlled entities Profit before taxation 14 Taxation credit (charge) 15 Profit for the year Attributable to: Equity holders of the Company as originally stated Prior year adjustment 2(a) Equity holders of the Company as restated Minority interests Distribution 16 Earnings per share 17 Basic Diluted	2007 HK$’000 4,781,678 (4,502,108 ) 279,570 165,368 (238,936 ) (18,471 ) (69,068 ) (23,597 ) 5,067 3,755 – – 223,549 (642 ) 326,595 50,552 377,147 345,665 – 345,665 31,482 377,147 369,668 HK$ 0.236 0.233	2006 HK$’000 (restated) 3,540,484 (3,185,938 ) 354,546 226,532 (188,890 ) – (78,862 ) (16,710 ) – – 60,756 26,914 (17,184 ) 26 367,128 (52,804 ) 314,324 310,487 (31,626 ) 278,861 35,463 314,324 998,070 HK$ 0.204 0.203

102

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Consolidated Balance Sheet

At 31 March 2007

Notes NON-CURRENT ASSETS Property, plant and equipment 18 Project under development 20 Properties under development 21 Prepaid lease payments 22 Goodwill 23 Other intangible assets 24 Interests in associates 25 Deposit for acquisition of an associate 25(b) Interests in jointly controlled entities 26 Available-for-sale investments 27 Loans receivable – due after one year 28 Amount due from an associate – due after one year 30 Deferred consideration receivable 31 CURRENT ASSETS Properties under development 21 Properties held for sale Prepaid lease payments 22 Inventories Loans receivable – due within one year 28 Amounts due from related companies – due within one year 29 Amounts due from associates – due within one year 30 Amounts due from customers for contract works 32 Debtors, deposits and prepayments 33 Conversion option embedded in loan receivable 34 Investments held for trading 35 Taxation recoverable Pledged bank deposits 36 Short term bank deposits 36 Bank balances and cash 36 CURRENT LIABILITIES Amounts due to customers for contract works 32 Creditors and accrued expenses 37 Amounts due to associates 38 Amounts due to minority shareholders 39 Loans from minority shareholders 40 Taxation payable Bank and other borrowings – due within one year 41 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	2007 HK$’000 528,203 2,411,680 44,458 67,968 61,646 55,775 710,234 – 1,928 1,312 30,956 – 6,597 3,920,757 82,732 – 1,766 23,425 181,508 150,099 187,314 223,637 1,910,690 1,427 155,783 2,942 42,601 441,769 294,997 3,700,690 1,038,548 1,157,990 17,429 4,071 – 61,286 597,386 2,876,710 823,980 4,744,737	2006 HK$’000 (restated) 35,800 1,958,869 – 23,136 61,646 8,035 411,457 160,211 2,570 1,653 – 117,000 10,223
		2,790,600
		– 78,245 575 – 105,886 251,852 227,776 163,379 1,415,407 – 161,693 1,605 118,622 526,504 139,534
		3,191,078
		429,615 899,829 3,678 4,638 123,439 45,759 400,158
		1,907,116
		1,283,962
		4,074,562

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FINANCIAL INFORMATION OF THE PYI GROUP

Notes NON-CURRENT LIABILITIES Bank and other borrowings – due after one year 41 Deferred consideration payable 45 Deferred tax liabilities 42 CAPITAL AND RESERVES Share capital 43 Reserves Equity attributable to equity holders of the Company Share-based payment reserve of a subsidiary Minority interests TOTAL EQUITY	2007 HK$’000 426,751 121,213 947,924 1,495,888 3,248,849 149,171 2,622,681 2,771,852 981 476,016 3,248,849	2006 HK$’000 (restated) 164,625 – 900,000
		1,064,625
		3,009,937

		137,880 2,432,752
		2,570,632 137 439,168
		3,009,937

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FINANCIAL INFORMATION OF THE PYI GROUP

Consolidated Statement of Changes in Equity

For the year ended 31 March 2007

			Attributable to the equity holders of the	Attributable to the equity holders of the	Attributable to the equity holders of the	Company			Total HK$’000 3,764,397 232,917
Share capital HK$’000 136,920 – 136,920 – – – – – – – – (1,052 ) – 1 2,011 – – – – – – – 137,880	Share premium HK$’000 184,811 – 184,811 – – – – – – – – (13,426 ) – 29 (2,011 ) – (274 ) – – – – – 169,129	Special reserve HK$’000 124,695 – 124,695 – – – – – – – – – – – – – – – – – – – 124,695	Capital reserve HK$’000 2,480,000 – 2,480,000 – – – – – – – (2,480,000 ) – – – – – – – – – – (201,291 ) (201,291 )	Investment revaluation reserve HK$’000 991 – 991 – (1,343 ) – – (1,343 ) – (1,343 ) – – – – – – – – – – – – (352 )	Other reserve HK$’000 – – – – – 5,733 – 5,733 – 5,733 – – – – – – – – – – – – 5,733	Translation reserve HK$’000 (561 ) – (561 ) 5,928 – – (224 ) 5,704 – 5,704 – – – – – – – – – – – – 5,143	Share- based payment reserve HK$’000 – – – – – – – – – – – – 4,945 (5 ) – – – – – – – – 4,940	Retained profits HK$’000 301,116 232,917 534,033 – – – – – 278,861 278,861 2,480,000 – – – – 29,931 – (998,070 ) – – – – 2,324,755
									3,997,314
									8,340 (1,646 ) 5,733 (224 )
									12,203 314,324
									326,527
									– (14,478 ) 5,082 25 – 29,931 (274 ) (998,070 ) (18,169 ) 10,525 3,313 (331,789)
									3,009,937

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FINANCIAL INFORMATION OF THE PYI GROUP

			Attributable to the equity holders of the	Attributable to the equity holders of the	Attributable to the equity holders of the	Company			Total HK$’000 3,009,937
Share capital HK$’000 137,880 – – – – – – – – – (200 ) – 3,657 – – 984 6,850 – – – – – – – 149,171	Share premium HK$’000 169,129 – – – – – – – – – (4,181 ) – 59,597 – – (984 ) 192,701 – (635 ) – – – – – 415,627	Special reserve HK$’000 124,695 – – – – – – – – – – – – – – – – – – – – – – – 124,695	Capital reserve HK$’000 (201,291 ) – – – – – – – – – – – – – – – – – – – – – – (142,035 ) (343,326 )	Investment revaluation reserve HK$’000 (352 ) – (238 ) – – (238 ) – – (238 ) – – – – – – – – – – – – – – – (590 )	Other reserve HK$’000 5,733 – – – 2,019 2,019 – (2,991 ) (972 ) 33 – – – – – – – – – – – – – – 4,794	Translation reserve HK$’000 5,143 54,168 – 15,167 – 69,335 – (218 ) 69,117 – – – – – – – – – – – – – – – 74,260	Share- based payment reserve HK$’000 4,940 – – – – – – – – – – 22,181 (5,096 ) (63 ) – – – – – – – – – – 21,962	Retained profits HK$’000 2,324,755 – – – – – 345,665 – 345,665 (33 ) – – – 63 – – – 24,477 – (369,668 ) – – – – 2,325,259
									81,968 (341 ) 15,167 2,019
									98,813 377,147 (3,209 )
									472,751
									– (4,381 ) 23,269 58,158 – 1,500 – 199,551 24,477 (635 ) (369,668) (17,547) 48,761 5,472 (202,796)
									3,248,849

The capital reserve represents the fair value in the underlying assets and liabilities that attributable to the additional interests in subsidiaries acquired by the Group.

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APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 March 2007

OPERATING ACTIVITIES Profit before taxation Adjustments for: Finance costs Gain on disposal of subsidiaries Loss (gain) on disposal of property, plant and equipment Gain on disposal of interest in an associate Reversal of impairment loss on interest in an associate Share of results of associates Share of results of jointly controlled entities Release of prepaid lease payments Amortisation of intangible assets Depreciation of property, plant and equipment Increase in fair value of listed investments held for trading Decrease in fair value of conversion option embedded in loan receivable Increase in fair value of derivative financial instruments Increase in fair value of investment properties Share-based payment expense Interest income Impairment loss on receivables Reversal of impairment loss on receivables Discount on acquisition of business Operating cash flows before movements in working capital Increase in project under development Decrease in amounts due from (to) customers for contract works, net of attributable interest expenses and depreciation Decrease (increase) in properties held for sale (Increase) decrease in loans receivable Increase in inventories (Increase) decrease in debtors, deposits and prepayments Decrease in amounts from related companies Decrease (increase) in amounts from associates Decrease in investments held for trading Increase (decrease) in creditors and accrued expenses Decrease in amounts due to jointly controlled entities Increase in amounts due to associates Cash generated from operations Hong Kong Profits Tax paid Hong Kong Profits Tax refunded Overseas tax paid NET CASH FROM OPERATING ACTIVITIES	2007 HK$’000 326,595 23,597 – 977 (5,067 ) – (223,549 ) 642 1,031 490 21,779 (83,444 ) 1,650 – – 23,083 (42,444 ) 18,628 (30,324 ) (3,755 ) 29,889 (290,888 ) 553,472 78,245 (72,759 ) (23,425 ) (511,224 ) 115,017 167,848 82,605 237,139 – 13,751 379,670 (3,296 ) – (892 ) 375,482	2006 HK$’000 (restated) 367,128 16,710 (60,756 ) (19,927 ) – (26,914 ) 17,184 (26 ) 2,677 – 29,180 (636 ) – (17,895 ) (85,400 ) 5,082 (26,096 ) 15,000 (14,173 ) – 201,138 (136,179) 23,017 (73,295 ) 85,196 – 145,421 95,029 (59,093 ) 12,227 (130,435 ) (20,766 ) 874 143,134 (2,296 ) 4,175 (192 ) 144,821

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APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Notes INVESTING ACTIVITIES Acquisition of business 45 Acquisition of interests in associates Increase in properties under development Additions to property, plant and equipment Acquisition of additional interests in subsidiaries Additions to prepaid lease payments Decrease (increase) in pledged bank deposits Interest received Proceeds from disposal of interest in an associate Dividend received from associates Repayment of deferred consideration receivable Proceeds from disposal of property, plant and equipment Proceeds from disposal of other intangible assets Acquisition of subsidiaries, net of cash and cash equivalents acquired 46 Deposit paid for acquisition of an associate Disposal of subsidiaries, net of cash and cash equivalents disposed of 47 Dividend received from a jointly controlled entity NET CASH (USED IN) FROM INVESTING ACTIVITIES FINANCING ACTIVITIES New bank and other borrowings raised Proceeds from issue of shares Contribution from minority shareholders Repayment of bank and other borrowings Interest paid Loan repaid to a minority shareholder Dividends paid to equity holders of the Company Dividends paid to minority shareholders of a subsidiary Share repurchase Repayment of amounts due to minority shareholders Share issue expenses NET CASH FROM (USED IN) FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS BROUGHT FORWARD CASH AND CASH EQUIVALENTS CARRIED FORWARD ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Short term bank deposits Bank balances and cash Bank overdrafts	2007 HK$’000 (369,262 ) (278,520 ) (125,996 ) (50,077 ) (7,800 ) (383 ) 76,021 42,070 26,055 4,790 4,000 1,973 115 – – – – (677,014 ) 1,198,106 58,158 50,261 (850,715 ) (39,808 ) (31,821 ) (19,531 ) (12,075 ) (4,381 ) (3,597 ) (635 ) 343,962 42,430 7,866 666,038 716,334 441,769 294,997 (20,432 ) 716,334	2006 HK$’000 (restated) – – – (14,580 ) (60,185 ) – (118,622 ) 25,921 – 12,573 – 49,192 – (200 ) (160,211 ) 782,240 7,000 523,128 557,183 25 10,525 (575,376 ) (27,787 ) (217,756 ) (968,139 ) (14,856 ) (14,478 ) – (274 ) (1,250,933 ) (582,984 ) 1,450 1,247,572 666,038 526,504 139,534 – 666,038

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APPENDIX I

Notes to the Consolidated Financial Statements

For the year ended 31 March 2007

1. GENERAL

The consolidated financial statements are presented in Hong Kong dollars, which is the same as the functional currency of the Company.

The Company is an investment holding company. The activities of its principal subsidiaries, associates and jointly controlled entities are set out in note 57.

2. CHANGE IN ACCOUNTING POLICY

Prior to 1 April 2006, purchase of additional interest in a subsidiary was recognised by calculating the goodwill or discount as the difference between the consideration paid for the additional interest acquired and the carrying amount of the net assets of the subsidiary attributable to the acquired interest. In the current year, management reassessed the Group’s accounting policy on purchase of additional interest in a subsidiary. The Company has changed its accounting policy for recognising such acquisition. Under the new accounting policy, the Group revalues, at the date of acquisition, all of the identifiable assets and liabilities of the subsidiary to fair value and recognises the fair value change attributable to the acquired interest by charging such amount to the capital reserve. Goodwill or discount arising on the purchase of the additional interest is calculated as the difference between the additional cost of the interest acquired and the increase in the Group’s relevant interest, based on the fair value of all identifiable assets and liabilities of the subsidiary. The directors consider that this policy (fair value for all transactions under business combinations and acquisitions of additional interests in subsidiaries) presents a more meaningful information based on the nature of the underlying operations of the subsidiary.

This change in accounting policy had no impact on the profit for the current year.

Prior year adjustments were made to account for the change in accounting policy for the year ended 31 March 2006 in respect of the acquisition of an additional 15% interest in subsidiaries investing in Yangkou Port. The financial effects of the change in accounting policy are summarised as follows:

(a) Effects on the result for the prior year:

Profit attributable to equity holders of the Company, originally stated Decrease in recognition of discount on acquisition of additional interest in subsidiaries Decrease in fair value of derivative financial instruments Decrease in profit for the year Profit attributable to equity holders of the Company, as restated	2006 HK$’000 310,487 (8,461 ) (23,165 ) (31,626 ) 278,861

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APPENDIX I

(b) Effects on the consolidated balance sheet as at 1 April 2005:

Effects on asset: Derivative financial instruments Effects on equity: Retained profits	As at 1.4.2005 (originally stated) HK$’000 20,792 301,116	Effect of change in accounting policy HK$’000 232,917 232,917	As at 1.4.2005 (restated) HK$’000 253,709

			534,033

3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

In the current year, the Group has applied, for the first time, a number of new standards, amendments and interpretations (the “new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) that are effective for the Group’s financial year from 1 April 2006 to 31 March 2007. The adoption of the new HKFRSs has no material effect on how the results and financial position for the current or prior accounting periods have been prepared and presented. Accordingly, no prior period adjustment has been recognised.

The Group has not early applied the following new and revised standards, amendment or interpretations that have been issued but are not yet effective. The directors of the Company anticipate that the application of these standards, amendment or interpretations will have no material impact on the results and financial position of the Group.

HKAS 1 (Amendment)	Capital Disclosures1
HKAS 23 (Revised)	Borrowing Costs2
HKFRS 7	Financial Instruments: Disclosures1
HKFRS 8	Operating Segments2
HK(IFRIC) – Int 8	Scope of HKFRS 23
HK(IFRIC) – Int 9	Reassessment of Embedded Derivatives4
HK(IFRIC) – Int 10	Interim Financial Reporting and Impairment5
HK(IFRIC) – Int 11	HKFRS 2 – Group and Treasury Share Transactions6
HK(IFRIC) – Int 12	Service Concession Arrangements7

1 Effective for annual periods beginning on or after 1 January 2007 2 Effective for annual periods beginning on or after 1 January 2009 3 Effective for annual periods beginning on or after 1 May 2006
4 Effective for annual periods beginning on or after 1 June 2006
5 Effective for annual periods beginning on or after 1 November 2006
6 Effective for annual periods beginning on or after 1 March 2007
7 Effective for annual periods beginning on or after 1 January 2008

4. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair values, as explained in the accounting policies set out below.

Basis of consolidation

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APPENDIX I

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations

The acquisition of subsidiaries/business is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities are recognised at their fair values at the acquisition date.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Acquisition of additional interests in subsidiaries

Goodwill

Goodwill arising on acquisitions of a subsidiary or an associate represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the relevant subsidiary or associate at the date of acquisition. Such goodwill is carried at cost less any identified impairment loss.

For the purposes of impairment testing, goodwill arising from an acquisition of a subsidiary is allocated to each of the relevant cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the acquisition. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired. For goodwill arising on an acquisition in a financial year, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that financial year. When the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in the consolidated income statement. An impairment loss for goodwill is not reversed in subsequent periods.

Capitalised goodwill arising on acquisition of a subsidiary/business is presented separately in the consolidated balance sheet. Capitalised goodwill arising on acquisition of an associate which is accounted for using the equity method is included in the cost of the investment of the associate and is assessed for impairment as part of the investment.

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APPENDIX I

On subsequent disposal of a subsidiary/business, the attributable amount of goodwill capitalised is included in the determination of the amount of profit or loss on disposal.

Discount on acquisition

A discount on acquisition arising on an acquisition of a subsidiary/business/additional interest in a subsidiary represents the excess of the net fair value of an acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the acquisition. Discount on acquisition is recognised immediately in profit or loss.

Property, plant and equipment

Property, plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

Project under development/properties under development under current asset

Project under development and properties under development under current asset which are held for future sale are stated at the lower of cost and net realisable value. Cost includes the cost of land/sea use rights, development expenditure, borrowing costs capitalised and other direct attributable expenses.

Properties under development under non-current asset

Properties under development for purpose not yet determined are carried in the consolidated financial statements at cost less any identified impairment loss. Cost of properties under development includes, where appropriate, interest capitalised. No depreciation has been provided for properties under development.

Prepaid lease payments

The up-front payments to acquire leasehold interest in land or sea are accounted for as operating leases and are stated at cost and released over the lease term on a straight-line basis.

Interests in associates

An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture.

112

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Interests in jointly controlled entities

Intangible assets acquired in a business combination

Subsequent to initial recognition, intangible assets with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives. Alternatively, intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of other intangible assets below).

Other intangible assets

Other intangible assets with finite useful lives are carried at cost less accumulated amortisation and identified impairment loss.

113

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Inventories

Inventories, including gas for sales and consumables, are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average cost method. Net realisable value is based on estimated selling prices in the ordinary course of business less the estimated costs necessary to make the sale.

Financial instruments

Financial assets

The Group’s financial assets are classified as loans and receivables, financial assets at fair value through profit or loss and available-for-sale financial assets. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market price. The accounting policies adopted are set out below:

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including bank deposits, bank balances, loans receivable, deferred consideration receivable, debtors and amounts due from related companies/associates) are carried at amortised cost using the effective interest method, less any identified impairment loss. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Impairment losses are reversed in subsequent periods when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss has two subcategories, including financial assets held for trading and those designated at fair value through profit or loss on initial recognition. At each balance sheet date subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value, with changes in fair value recognised directly in profit or loss in the period in which they arise.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments. At each balance sheet date subsequent to initial recognition, available-for-sale financial assets are measured at fair value. Changes in fair value are recognised in equity, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in equity is removed from equity and recognised in profit or loss. Any impairment losses on available-for-sale financial assets are recognised in profit or loss. Impairment losses on available-for-sale equity investments will not reverse in profit or loss in subsequent periods.

114

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Financial liabilities and equity

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Financial liabilities

The Group’s financial liabilities (including creditors, amounts due to associates/minority shareholders, loans from minority shareholders, deferred consideration payable and bank and other borrowings) are measured at amortised cost, using the effective interest method, subsequent to initial recognition.

Derivative financial instruments

Derivative financial instruments are initially measured at fair value on the contract date, and are remeasured to fair value at subsequent reporting dates.

Derecognition

Impairment (other than goodwill and intangible asset with indefinite lives)

Construction contracts

When the outcome of a construction contract can be estimated reliably, contract costs are recognised as expenses by reference to the stage of completion of the contract activity at the balance sheet date on the same basis as contract revenue. When the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as expenses in the period in which they are incurred. Variations in contract work and claims are included to the extent that they have been agreed with the customer. Provision is made for expected losses as soon as they are anticipated by management.

115

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Where contract costs incurred to date plus recognised profit less recognised loss exceed progress billings, the excess is shown as amount due from a customer for contract work. Where progress billings exceed contract costs incurred to date plus recognised profit less recognised loss, the excess is shown as amount due to a customer for contract work.

Leasing

Rental income from operating leases is recognised in the consolidated income statement on a straight-line basis over the term of the relevant lease.

Rentals payable under operating leases are charged to profit or loss on a straight line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight-line basis.

Revenue recognition

Revenue from a construction contract is recognised on the percentage of completion method, measured by reference to the value of work certified during the year.

Project management service income and facilities management service income is recognised when services are provided.

Revenue from distribution of liquefied petroleum gas (“LPG”) is recognised when goods are delivered and title has passed.

Revenue from sale of properties is recognised upon the execution of a binding sales agreement.

Revenue from sale of securities is recognised when the sale contract becomes unconditional.

Rental income under operating leases is recognised on a straight-line basis over the term of the relevant lease.

Dividend income from investments is recognised when the Group’s right to receive payment has been established.

Service income is recognised at the time when services are rendered.

Borrowing costs

All other borrowing costs are recognised as an expense in the period in which they are incurred.

Retirement benefit costs

Payments to defined contribution retirement benefit schemes are charged as an expense or capitalised in contracts in progress, where appropriate, when employees have rendered service entitling them to the contributions.

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APPENDIX I

Taxation

Taxation represents the sum of the tax currently payable and deferred tax.

Foreign currencies

Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation are treated as assets and liabilities of that foreign operation and translated at the rate of exchange prevailing at the balance sheet date. Exchange differences arising are recognised in the translation reserve.

Share-based payment transactions

In relation to share options granted and vested before 1 April 2005, the Group did not recognise the financial effect of those share options until they were exercised.

For share options granted to directors and employees of the Group after 1 April 2005, the fair value of services received determined by reference to the fair value of share options granted at the grant date is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share-based payment reserve).

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FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

At each balance sheet date, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the estimates, if any, is recognised in profit or loss with a corresponding adjustment to share-based payment reserve. At the time when the share options are exercised, the amount previously recognised in share-based payment reserve will be transferred to share premium. When the share options are forfeited after vesting date or are still not exercised at the expiry date, the amount previously recognised in sharebased payment reserve will be transferred to retained profits.

5. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the process of applying the Group’s accounting policies, management has made various estimates based on past experiences, expectations of the future and other information. The key sources of estimation uncertainty that may significantly affect the amounts recognised in the consolidated financial statements are disclosed below.

Deferred tax asset

At 31 March 2007, a deferred tax asset in relation to unused tax losses of HK$734,000,000 has not been recognised in the Group’s consolidated balance sheet due to unpredictability of future profit streams on those subsidiaries. In cases where the actual future profits generated by those subsidiaries are more than expected, a material deferred tax credit would be recognised in the consolidated income statement in the period in which the tax losses are utilised.

6. FINANCIAL INSTRUMENTS

6a. Financial risk management objectives and policies

The Group’s major financial instruments include bank deposits, bank balances, debtors, loans receivable, available-for-sale investments, investments held for trading, conversion option, creditors, amounts due from (to) associates/related companies/minority shareholders, loans from minority shareholders and bank and other borrowings. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below:

(a) Market risk

(i) Interest rate risk

The Group’s exposure to fair value interest rate risk relates primarily to the fixed-rate debt obligations, including bank and other borrowings. For the variable-rate borrowings, it is exposed to cash flow interest rate risk. The Group’s interest-bearing financial assets (including loans receivable, amounts due from associates/related companies and bank balances) have exposure to cash flow interest rate due to the fluctuation of the prevailing market interest.

The Group has not entered into interest rate hedging contracts. However, management monitors closely the interest rate exposure and will consider using interest rate swap should the need arise.

(ii) Currency risk

Foreign currency risk is the risk that the value of a monetary item will fluctuate because of changes in foreign exchange rates. Certain receivables of the Group are denominated in foreign currencies such as Australian dollars (“A$”) which expose the Group to foreign currency risk. The Group currently does not have a foreign currency hedging policy. However, management monitors foreign currency exposure and will consider hedging significant foreign currency exposure should the need arise.

(iii) Other price risk

The Group is exposed to equity security price risk on its available-for-sale and held for trading investments. Management manages this exposure by maintaining a portfolio of investments with different risk profiles.

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APPENDIX I

(b) Credit risk

The Group’s principal financial assets are bank deposits and bank balances, loans receivable, debtors and amounts due from related companies/associates.

The credit risk on bank deposits and bank balances is limited because the counterparties are banks with good reputation.

The Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge obligations by the counterparties is:

the carrying amount of the respective recognised financial assets as stated in the consolidated balance sheet; and
the amount of contingent liabilities as disclosed in note 50.

In order to minimise the credit risk, management has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews regularly the recoverable amount of each individual debtor to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

Due to the fact that there are only a few major property developers in Hong Kong, the Group has significant concentration of credit risk in a few customers and significant concentration of credit risk by geographic location in Hong Kong. In view of their credit standings, good payment record in the past and long term relationships with the Group, the directors of the Company consider that the Group’s credit risk is minimal. At the balance sheet date, the outstanding balances from the five largest customers amounted to approximately HK$541,617,000.

With respect to credit risk arising from amounts due from related companies and associates, the Group’s exposure to credit risk arising from default of counterparties is limited as the counterparties have a good credit standing and the Company does not expect any significant loss for uncollected advances from these entities.

(c) Liquidity risk

The objective of the Group is to maintain a balance between the continuity of funding and the flexibility through the use of bank and other borrowings. In addition, banking facilities have been put in place for general funding purposes.

6b. Fair value

The fair value of financial assets and financial liabilities are determined as follows:

the fair value of financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices;
the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions; and
the fair value of derivative instruments are calculated using quoted prices. Where such prices are not available, the fair value of a non-option derivative is estimated using discounted cash flow analysis and the applicable yield curve. For option-based derivatives, option pricing models are adopted.

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair values.

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APPENDIX I

7. TURNOVER

Turnover represents the total value of contract work certified and the gross proceeds received and receivable from project management services in connection with contract work rendered by the Group, service income from facilities management, revenue from LPG distribution, property rental and related income, income from loans receivable, dividend income from investments and gross proceeds from sale of securities/properties during the year and is analysed as follows:

Revenue from construction contracts Sale of securities Revenue from LPG distribution Income from loans receivable Sale of properties Facilities management service income Project management service income Dividend income from listed investments held for trading Property rental and related income	2007 HK$’000 4,325,799 137,966 110,414 77,466 98,000 17,204 9,375 2,819 2,635 4,781,678	2006 HK$’000 3,075,871 297,678 – 86,129 8,759 5,516 26,776 3,024 36,731
		3,540,484

8. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group’s operations are currently organised into seven operating divisions, namely management contracting, project management, facilities management, port and infrastructure development and logistics, LPG distribution, treasury investment and property investment. These divisions form the basis on which the Group reports its primary segment information.

In the previous year, the Group’s operations were organised into seven segments, namely building construction, civil engineering, project management, facilities management, port and infrastructure development, treasury investment and property investment. During the year, management has reorganised the operating segments by grouping the building construction and civil engineering segments into the management contracting segment. Comparative segment information has been restated accordingly.

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FINANCIAL INFORMATION OF THE PYI GROUP

Business segment information for the year ended 31 March 2007 is presented below:

TURNOVER External sales Inter-segment sales RESULTS Segment results Unallocated expenses Interest income Finance costs Discount on acquisition of business Gain on disposal of interest in an associate Share of results of associates Share of results of jointly controlled entities Profit before taxation Taxation credit Profit for the year	Management contracting HK$’000 4,325,799 1,596 4,327,395 58,733 – – 1,299 (642 )	Project management HK$’000 9,375 12,215 21,590 2,797 – – 681 –	Facilities management HK$’000 17,204 7,423 24,627 (3,008 ) – – – –	Port and infrastructure development and logistics HK$’000 – 1,264 1,264 (14,472 ) – – 149,717 –	LPG distribution HK$’000 110,414 – 110,414 3,304 3,755 – – –	Treasury investment HK$’000 218,251 – 218,251 173,680 – 5,067 – –	Property investment HK$’000 100,635 – 100,635 13,863 – – 71,852 –	Eliminations HK$’000 – (22,498 ) (22,498 ) – – – – –	Consolidated HK$’000 4,781,678 –
									4,781,678

									234,897 (158,878 ) 42,444 (23,597 ) 3,755 5,067 223,549 (642 )
									326,595 50,552
									377,147

Inter-segment sales are charged at market price or, where no market price was available, at terms determined and agreed by both parties.

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FINANCIAL INFORMATION OF THE PYI GROUP

At 31 March 2007

Port and infrastructure Management Project Facilities development LPG Treasury Property contracting management management and logistics distribution investment investment HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ASSETS Segment assets 1,966,433 23,329 4,246 3,161,018 308,674 678,049 51,729 Interests in associates 29,038 3,376 – 605,179 – – 72,641 Interests in jointly controlled entities 1,928 – – – – – – Unallocated assets Total assets LIABILITIES Segment liabilities 1,844,278 1,845 2,265 665,139 33,712 2,769 346 Unallocated liabilities Total liabilities OTHER INFORMATION Capital additions attributable to segment 19,418 46 1,300 401,552 128,491 – 336 Unallocated capital additions Depreciation and amortisation attributable to segment 5,853 4 169 10,085 3,529 44 1 Unallocated depreciation and amortisation Impairment loss on receivables 615 – – – – 18,000 – Unallocated amount Loss on disposal of property, plant and equipment 979 – – – – – – Unallocated amount Reversal of impairment loss on receivables – – – – – 30,324 –	Consolidated HK$’000 6,193,478 710,234 1,928 715,807
	7,621,447

	2,550,354 1,822,244
	4,372,598

	551,143 3,743
	554,886 19,685 2,584
	22,269 18,615 13
	18,628 979 (2 )
	977 30,324

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FINANCIAL INFORMATION OF THE PYI GROUP

Business segment information for the year ended 31 March 2006 is presented below:

TURNOVER External sales Inter-segment sales RESULTS Segment results Unallocated other income Unallocated expenses Interest income Finance costs Increase in fair value of derivative financial instruments Increase in fair value of investment properties (Loss) gain on disposal of subsidiaries Gain on disposal of subsidiaries not attributable to segment Reversal of impairment loss on interest in an associate Share of results of associates Share of results of associates not attributable to segment Share of results of jointly controlled entities Profit before taxation Taxation charge Profit for the year	Management contracting HK$’000 3,075,871 283 3,076,154 120,209 – – (4,456 ) – 1,043 26	Project management HK$’000 26,776 – 26,776 16,049 – – – – 1,106 –	Facilities management HK$’000 5,516 1,471 6,987 1,593 – – – – – –	Port and infrastructure development HK$’000 – – – – 17,895 – – – – –	Treasury investment HK$’000 386,831 3,481 390,312 79,922 – – – 26,914 (27,949 ) –	Property investment HK$’000 45,490 15,515 61,005 12,161 – 85,400 58,462 – 629 –	Eliminations HK$’000 – (20,750 ) (20,750 ) – – – – – – –	Consolidated HK$’000 (restated) 3,540,484 –
								3,540,484

								229,934 82,289 (128,288 ) 26,096 (16,710 ) 17,895 85,400 54,006 6,750 26,914 (25,171 ) 7,987 26
								367,128 (52,804 )
								314,324

Inter-segment sales are charged at market price or, where no market price was available, at terms determined and agreed by both parties.

123

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FINANCIAL INFORMATION OF THE PYI GROUP

At 31 March 2006

Port and Management Project Facilities infrastructure Treasury Property contracting management management development investment investment HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ASSETS Segment assets 1,414,854 45,980 3,639 2,254,969 960,849 78,494 Interests in associates 32,366 2,564 – – 375,899 628 Interests in jointly controlled entities 2,570 – – – – – Unallocated assets Total assets LIABILITIES Segment liabilities 1,210,817 5,283 1,895 263,278 96,136 43,674 Unallocated liabilities Total liabilities OTHER INFORMATION Capital additions attributable to segment 5,175 204 63 3,782 2,595 1,008 Unallocated capital additions Depreciation and amortisation attributable to segment 13,680 75 34 – 1,329 7,693 Unallocated depreciation and amortisation Impairment loss on receivables – – – – 15,000 – Gain on disposal of property, plant and equipment 19,953 – – – – – Unallocated amount Reversal of impairment loss on receivables – – – – 14,173 –	Consolidated HK$’000 4,758,785 411,457 2,570 808,866
	5,981,678

	1,621,083 1,350,658
	2,971,741

	12,827 2,726
	15,553 22,811 6,369
	29,180 15,000 19,953 (26 )
	19,927 14,173

Geographical segments

The Group’s operations are located in the People’s Republic of China other than Hong Kong and Macau (the “PRC”), Hong Kong and Macau.

124

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

The following table provides an analysis of the Group’s turnover by geographical market, irrespective of the origin of the goods/services:

Hong Kong Macau The PRC	2007 HK$’000 3,086,507 1,561,006 134,165 4,781,678	2006 HK$’000 3,113,854 389,050 37,580
		3,540,484

The following is an analysis of the carrying amount of segment assets and capital additions, analysed by the geographical area in which the assets are located:

Hong Kong Macau The PRC 9. OTHER INCOME	Carrying amount of segment assets 2007 2006 HK$’000 HK$’000 1,734,243 2,134,102 709,855 142,293 3,749,380 2,482,390 6,193,478 4,758,785	Capital additions 2007 2006 HK$’000 HK$’000 16,952 8,841 – – 534,191 3,986 551,143 12,827	Capital additions 2007 2006 HK$’000 HK$’000 16,952 8,841 – – 534,191 3,986 551,143 12,827
			12,827

Interest income Imputed interest income on deferred consideration receivable Recovery of interest and legal expenses in connection with a court action against the vendor of a former associate Reversal of impairment loss on receivables Increase in fair value of listed investments held for trading Increase in fair value of derivative financial instruments Increase in fair value of investment properties Net exchange gain Others 10. OTHER EXPENSES Impairment loss on receivables Decrease in fair value of conversion option embedded in loan receivable Penalty of interest charged on capital gain tax in connection with disposal of a former associate Accruals of withholding tax on dividend income in connection with a former investment Net exchange loss Others	2007 HK$’000 42,070 374 – 30,324 83,444 – – 5,712 3,444 165,368 2007 HK$’000 18,628 1,650 – 45,415 – 3,375 69,068	2006 HK$’000 (restated) 25,921 175 82,289 14,173 636 17,895 85,400 – 43
		226,532

		2006 HK$’000 15,000 – 46,500 – 16,428 934
		78,862

125

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

11. FINANCE COSTS

Borrowing costs on: Bank borrowings wholly repayable within five years Bank borrowings not wholly repayable within five years Loan from a minority shareholder Others Less: Amount capitalised in respect of contracts in progress Amount capitalised in respect of project under development Amount capitalised in respect of properties under development	2007 HK$’000 23,349 8,706 155 7,598 39,808 (3,307 ) (11,710 ) (1,194 ) 23,597	2006 HK$’000 17,763 – 8,392 1,632
		27,787 (2,685 ) (8,392 ) –
		16,710

The capitalised borrowing costs represent the actual borrowing costs incurred by the entities invested in the project and properties during the year.

12. DIRECTORS’ EMOLUMENTS

The emoluments paid or payable to each of the seven (2006: nine) directors are as follows:

Name of directors 2007 Lau Ko Yuen, Tom Chan Kwok Keung, Charles Chow Ming Kuen, Joseph Kwok Shiu Keung, Ernest Chan Shu Kin Leung Po Wing, Bowen Joseph Li Chang An 2006 Lau Ko Yuen, Tom Chan Fut Yan Chau Mei Wah, Rosanna Cheung Hon Kit Chan Kwok Keung, Charles Chow Ming Kuen, Joseph Kwok Shiu Keung, Ernest Chan Shu Kin Cheung Ting Kau, Vincent	Fees HK$’000 360 320 787 380 439 227 68 2,581 200 4 4 4 180 488 312 308 4 1,504	Salaries and other benefits HK$’000 4,300 – – – – – – 4,300 2,700 1,053 1,053 – 368 – – – – 5,174	Discretionary bonus HK$’000 – – – – – – – – 836 – – – – – – – – 836	Retirement benefit scheme contributions HK$’000 319 – – – – – – 319 180 105 105 – 37 – – – – 427	Share-based payment HK$’000 5,402 – – – – 1,174 1,274 7,850 – – – – – – – – – –	Total HK$’000 10,381 320 787 380 439 1,401 1,342
						15,050

						3,916 1,162 1,162 4 585 488 312 308 4
						7,941

The above discretionary bonus is performance related incentive payment determined by reference to the results of the Group.

None of the directors has waived any emoluments during the year.

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FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

13. EMPLOYEES’ EMOLUMENTS

The five highest paid individuals in the Group for the year included one director (2006: one director) of the Company, details of whose emoluments are set out in note 12 above.

The aggregate emoluments of the remaining four (2006: four) highest paid individuals, who are employees of the Group, are as follows:

Salaries and other benefits Discretionary bonus Retirement benefit scheme contributions Share-based payment expense Their emoluments were within the following bands: HK$2,000,001 to HK$2,500,000 HK$2,500,001 to HK$3,000,000 HK$3,000,001 to HK$3,500,000 HK$5,000,001 to HK$5,500,000	2007 2006 HK$’000 HK$’000 8,120 6,141 1,102 2,996 154 159 3,645 926 13,021 10,222 Number of employees 2007 2006 2 2 – 2 1 – 1 – 4 4	2006 HK$’000 6,141 2,996 159 926
		10,222

		4

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FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

14. PROFIT BEFORE TAXATION

Profit before taxation has been arrived at after charging: Amortisation of intangible assets (included in distribution costs) Auditor’s remuneration Cost of inventories recognised as an expense Cost of construction works recognised as an expense Depreciation of property, plant and equipment_(note (a) below) Impairment loss on debtors (included in administrative expenses) Loss on disposal of property, plant and equipment Operating lease rentals in respect of: Premises Plant and machinery Release of prepaid lease payments Share of taxation of associates (included in share of results of associates) Staff costs(note (b) below) and after crediting: Gain on disposal of investments held for trading Gain on disposal of property, plant and equipment Rental income under operating leases in respect of: Premises, net of outgoings of HK$1,924,000 (2006: HK$14,557,000) Plant and machinery Total interest income _Notes: (a) Depreciation of property, plant and equipment: Amount provided for the year Less: Amount capitalised in respect of contracts in progress Amount capitalised in respect of project under development Amount capitalised in respect of properties under development	2007 HK$’000 490 6,340 174,652 4,192,824 21,779 – 977 16,925 1,134 1,031 16,206 151,386 6,028 – – 17 100,714 2007 HK$’000 24,255 (1,491 ) (973 ) (12 ) 21,779	2006 HK$’000 – 3,914 5,149 2,879,762 29,180 12,161 – 2,423 1,252 2,677 193 118,589 13,818 19,927 22,174 539 107,482 2006 HK$’000 34,591 (4,106 ) (1,305 ) – 29,180

128

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

(b) Staff costs: Directors’ emoluments_(Note 12) Other staff costs: Salaries and other benefits Retirement benefit scheme contributions, net of forfeited contributions of HK$1,808,000 (2006: HK$2,854,000) Share-based payment expense Less: Amount capitalised in respect of contracts in progress Amount capitalised in respect of project under development Amount capitalised in respect of properties under development 15. TAXATION (CREDIT) CHARGE The (credit) charge comprises: Hong Kong Profits Tax: Current year (Over)underprovision in prior years Overseas taxation: Current year (Over)underprovision in prior years Deferred taxation(Note 42)_ Taxation attributable to the Company and its subsidiaries	2007 HK$’000 15,050 321,167 10,263 15,233 361,713 (202,805 ) (6,495 ) (1,027 ) 151,386 2007 HK$’000 4,325 (268 ) 4,057 9,109 (565 ) 8,544 (63,153 ) (50,552 )	2006 HK$’000 7,941 252,361 7,288 5,082 272,672 (150,856 ) (3,227 ) – 118,589 2006 HK$’000 4,101 1,877 5,978 3,332 40,000 43,332 3,494 52,804

Hong Kong Profits Tax is calculated at 17.5% (2006: 17.5%) of the estimated assessable profits for the year.

Overseas taxation is calculated at the rates prevailing in the respective jurisdictions.

129

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

The taxation (credit) charge for the year can be reconciled to the profit before taxation per the consolidated income statement as follows:

Profit before taxation Tax at Hong Kong Profits Tax rate of 17.5% (2006: 17.5%) Tax effect of share of results of associates/jointly controlled entities Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of tax losses not recognised Tax effect of other deductible temporary difference not recognised Tax effect of utilisation of tax losses previously not recognised Tax effect of utilisation of other deductible temporary difference previously not recognised Decrease in deferred tax liability resulting from change in tax rate enacted in March 2007 of certain subsidiaries Tax effect of different tax rates of subsidiaries operating in other jurisdictions (Over)underprovision in prior years Taxation (credit) charge for the year	2007 HK$’000 326,595 57,154 (39,008 ) 24,305 (22,174 ) 19,170 3,053 (22,747 ) (1,158 ) (62,666 ) (5,648 ) (833 ) (50,552 )	2006 HK$’000 (restated) 367,128

		64,247 3,003 23,666 (64,823 ) 12,572 2,087 (23,225 ) (9,207 ) – 2,607 41,877
		52,804

Pursuant to the PRC enterprise income tax law passed by the Tenth National People’s Congress on 16 March 2007, the new enterprise income tax rates for domestic and foreign enterprises are unified at 25% effective from 1 January 2008. Foreign enterprises which are entitled to special incentives will be given concessions throughout a 5-year transition period, if applicable. Management has assessed this change in tax law on the Group’s results of operations and financial position and the impact on deferred taxation has set out in note 42.

Details of the deferred taxation are set out in note 42.

16. DISTRIBUTION

Dividends recognised as distributions to equity holders of the Company during the year: Interim dividend paid for 2007 – HK1.5 cents (2006: HK1.5 cents) per share Special cash dividend paid for 2006 – HK70.0 cents per share Special dividend by way of distribution of the value derived from the Group’s divestment of China Strategic Holdings Limited – HK22.2 cents (2006: Nil) per share Final dividend paid for 2006 – HK1.5 cents (2005: HK1.5 cents) per share Dividends proposed in respect of current year: Final dividend proposed for 2007 – HK1.5 cents (2006: HK1.5 cents) per share	2007 HK$’000 22,069 – 325,660 21,939 369,668 22,393	2006 HK$’000 20,513 957,177 – 20,380
		998,070

		21,969

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FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Of the distribution made during the year, approximately HK$15,595,000 (2006: HK$13,194,000) and HK$8,882,000 (2006: HK$16,737,000) were settled in shares under the Company’s scrip dividend schemes announced by the directors of the Company on 18 September 2006 and 11 January 2007 in respect of the final dividend for the year ended 31 March 2006 and the interim dividend for the six months ended 30 September 2006, respectively, and were credited to the retained profits of the Company during the year.

On 4 May 2006, the directors of the Company resolved to declare a special dividend by way of distribution (“PYI Distribution Scheme”) of the value derived from the Group’s divestment of China Strategic Holdings Limited (“China Strategic”, an associate of the Group as at 31 March 2006) to the Company’s shareholders whose names appeared on the register of members of the Company on 26 May 2006 upon the completion of the group restructuring of China Strategic (“Group Restructuring”).

On 19 May 2006, China Strategic completed the Group Restructuring which involved (i) the transfer of all its subsidiaries carrying on property development and investment holding business and investing in vessels for sand mining and all associates carrying on manufacturing and marketing of tires and providing package tour, travel and other related services to Group Dragon Investments Limited (“GDI”); and (ii) the distribution in specie of shares in GDI (“GDI Shares”) to its shareholders, including the Group, on the basis of one GDI Share for every China Strategic consolidated share held.

Upon completion of the Group Restructuring, the Group was entitled to receive 129,409,897 GDI Shares and Hanny Holdings Limited (“Hanny”, a then substantial shareholder of China Strategic and a related company of the Group) made a voluntary offer (“GDI Offer”) to the shareholders of GDI to acquire all the GDI Shares on the basis of either (a) 1 share in Hanny (“Hanny Share”) plus HK$1.8 in cash for every 5 GDI Shares; or (b) a 2% 5-year convertible bond issued by Hanny with face value of HK$15 each (“Hanny Bonds”) for every 5 GDI Shares.

Under the PYI Distribution Scheme, for every 500 shares held, the Company’s shareholders were entitled to receive the value derived from 40 GDI Shares in the form of either (a) 8 Hanny Shares plus HK$14.4 in cash; or (b) 8 Hanny Bonds.

Based on the election of the Company’s shareholders on 16 June 2006, the Company announced that holders of approximately 311,232,201 shares and 1,153,100,543 shares in the Company elected for Hanny Shares plus cash and for Hanny Bonds, respectively. Consequently, the Company accepted the GDI Offer in respect of the entire 129,409,897 GDI Shares held by it and distributed to its shareholders special dividend in respect of 117,143,920 GDI Shares. These GDI shares entitled the shareholders to receive in total the following:

(a) an aggregate of 4,979,616 Hanny Shares plus HK$8,963,000 in cash; and

(b) an aggregate face value of HK$276,737,000 Hanny Bonds.

The directors consider that the fair value of a GDI Share, when liquidated in the form of Hanny Bond, is HK$2.78 by reference to the valuation report dated 19 May 2006 prepared by RHL Appraisal Limited, an independent valuer not connected with the Group. As such, the special dividend is equivalent to about HK22.2 cents per share of the Company.

Details of the above transactions were set out in the Company’s circular and announcement dated 29 May 2006 and 16 June 2006, respectively.

The amount of the final dividend proposed for the year ended 31 March 2007, which will be in the form of scrip with a cash option, has been calculated by reference to the 1,492,848,407 issued shares as at the date of this report.

131

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

17. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share for the year is based on the following data:

Earnings attributable to equity holders of the Company for the purposes of basic and diluted earnings per share Weighted average number of ordinary shares for the purpose of basic earnings per share Effect of dilutive potential ordinary shares: Share options Weighted average number of ordinary shares for the purpose of diluted earnings per share	2007 HK$’000 345,665 2007 Number of shares 1,462,372,940 19,042,143 1,481,415,083	2006 HK$’000 (restated) 278,861

		2006 Number of shares 1,367,759,328 2,861,857
		1,370,621,185

The following table summarised the impact on basic and diluted earnings per share for the year ended 31 March 2006 as a result of change in accounting policy:

Reported figures before adjustments Adjustments arising from the change in accounting policy Restated	Basic HK$ 0.227 (0.023 ) 0.204	Diluted HK$ 0.227 (0.024 )
		0.203

132

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

18. PROPERTY, PLANT AND EQUIPMENT

COST At 1 April 2005 Exchange realignment On disposal of subsidiaries Additions Disposals At 31 March 2006 Exchange realignment On acquisition of business Additions Disposals At 31 March 2007 DEPRECIATION At 1 April 2005 Exchange realignment Provided for the year Eliminated on disposal of subsidiaries Eliminated on disposals At 31 March 2006 Exchange realignment Provided for the year Eliminated on disposals At 31 March 2007 CARRYING AMOUNT At 31 March 2007 At 31 March 2006	Buildings HK$’000 90,558 20 (89,678 ) – – 900 1,192 45,891 18,895 (792 ) 66,086 15,192 2 1,445 (16,438 ) – 201 9 1,414 (223 ) 1,401 64,685 699	Plant and machinery HK$’000 387,160 – (23,667 ) 4,447 (309,615 ) 58,325 – – 13,062 (9,106 ) 62,281 325,786 – 13,833 (15,500 ) (280,813 ) 43,306 – 5,076 (8,051 ) 40,331 21,950 15,019	LPG equipment HK$’000 – – – – – – 9,940 393,626 194 – 403,760 – – – – – – – 10,828 – 10,828 392,932 –	Motor vehicles and vessels HK$’000 89,179 82 (62,584 ) 4,650 (5,880 ) 25,447 699 18,127 9,286 (1,562 ) 51,997 32,825 8 7,922 (17,837 ) (5,655 ) 17,263 54 2,959 (1,206 ) 19,070 32,927 8,184	Furniture, fixtures and computer equipment HK$’000 140,766 59 (70,413 ) 5,483 (3,885 ) 72,010 156 – 8,640 (2,035 ) 78,771 96,582 7 11,391 (44,221 ) (3,647 ) 60,112 37 3,978 (1,065 ) 63,062 15,709 11,898	Total HK$’000 707,663 161 (246,342 ) 14,580 (319,380 ) 156,682 11,987 457,644 50,077 (13,495 ) 662,895 470,385 17 34,591 (93,996 ) (290,115 ) 120,882 100 24,255 (10,545 ) 134,692 528,203 35,800

The above items of property, plant and equipment are depreciated on a straight line basis at the following rates per annum:

Buildings

Plant and machinery LPG equipment Motor vehicles and vessels Furniture and fixtures Computer equipment

Over the remaining period of the relevant leases or fifty years, whichever is shorter 10%

5% – 10%
5% – 20%
8% – 20% 20% – 33[1] /3%

133

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

The carrying amount of buildings are analysed as follows:

Buildings erected on long-term leasehold land in the PRC Buildings erected on medium-term leasehold land in the PRC 19. INVESTMENT PROPERTIES FAIR VALUE Balance brought forward Increase in fair value during the year Disposals Balance carried forward 20. PROJECT UNDER DEVELOPMENT Land and sea use rights Development costs	2007 HK$’000 91 64,594 64,685 2007 HK$’000 – – – – 2007 HK$’000 1,747,484 664,196 2,411,680	2006 HK$’000 135 564
		699

		2006 HK$’000 455,000 85,400 (540,400 )
		–

		2006 HK$’000 1,649,337 309,532
		1,958,869

The amount relates to a development project located in Jiangsu Province, the PRC. The Group is undergoing the reclamation of certain parcels of land from the sea for development for future sale. According to the land/sea use certificates, the land/sea use rights are granted for a term of not less than 50 years commencing 2004.

21. PROPERTIES UNDER DEVELOPMENT

At 1 April, at cost Expenditure incurred during the year_(Note)_ At 31 March, at cost Represented by: Amount shown under non-current assets Amount shown under current assets	2007 HK$’000 – 127,190 127,190 44,458 82,732 127,190	2006 HK$’000 – –
		–

		– –
		–

The amount relates to certain property development projects located in Jiangsu Province, the PRC.

Note: The expenditure included a payment of HK$107,176,000 for lease of land in Jiangsu Province.

134

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

22. PREPAID LEASE PAYMENTS

The Group’s prepaid lease payments represent land in the PRC and Hong Kong held under medium-term leases and are analysed for reporting purposes as follows:

Non-current assets Current assets	2007 HK$’000 67,968 1,766 69,734	2006 HK$’000 23,136 575
		23,711

23. GOODWILL

For the purpose of impairment testing, the carrying amount of goodwill at 31 March 2007 has been allocated to building construction unit as a cash generating unit (“CGU”).

The recoverable amount of the above CGU has been determined based on value in use calculations. The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next two years and extrapolates cash flows for the following five years with a steady growth rate of 5%. The rate used to discount the forecast cash flows is 8%. The value in use calculations is calculated based on the budgeted gross margin, which is determined using the CGU’s past performance and management’s expectations for the market development.

24. OTHER INTANGIBLE ASSETS

Motor vehicles Club Fair value registration membership adjustment on marks in Hong Kong leasehold land HK$’000 HK$’000 HK$’000 (Note a) (Note a) (Note b) COST At 1 April 2005 3,059 12,422 – Arising on acquisition of subsidiaries 973 – – Disposal of subsidiaries (3,059 ) (5,360 ) – At 31 March 2006 973 7,062 – Disposal (115 ) – – Arising on acquisition of business – – 9,210 Exchange realignment – – 233 At 31 March 2007 858 7,062 9,443 AMORTISATION Provided for the year – – 112 Exchange realignment – – – At 31 March 2007 – – 112 CARRYING VALUE At 31 March 2007 858 7,062 9,331 At 31 March 2006 973 7,062 –	Rights of operation HK$’000 (Note c) – – – – – 35,923 907 36,830 358 10 368 36,462 –	Customer base HK$’000 (Note d) – – – – – 2,032 51 2,083 20 1 21 2,062 –	Total HK$’000 15,481 973 (8,419 )
			8,035 (115 ) 47,165 1,191
			56,276
			490 11
			501
			55,775

			8,035

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APPENDIX I

Notes:

(a) The assets have indefinite useful life. The directors are of the opinion that the club membership and motor vehicles registration marks are at least their carrying amounts.
(b) The amount represents the fair value adjustment on leasehold land in Wuhan, the PRC and the amount is to be amortised on the same basis as the related prepaid lease payments.
(c) Rights of operation represent the fair value of rights to operate LPG business in Wuhan, the PRC. The rights of operation are amortised on a straight-line basis over the operation period of 50 years.
(d) Customer base represents the fair value of customers relationship acquired for LPG business through acquisition of business. The amortisation is on a straight-line basis over 10 years.

25. INTERESTS IN ASSOCIATES

Cost of investments in associates, less impairment: Listed shares in Hong Kong_(note (a)) Unlisted investments(note (b)) Share of post-acquisition profits (losses), net of dividends received Market value of listed shares in Hong Kong _Notes:	2007 HK$’000 – 503,716 503,716 206,518 710,234 –	2006 HK$’000 (restated) 513,192 64,985 578,177 (166,720 ) 411,457 258,820

(a) The listed shares in Hong Kong represented the Group’s 29.36% equity interest in China Strategic as at 31 March 2006. The Group’s share of net assets in China Strategic at 31 March 2006 was calculated based on the net assets of China Strategic at 31 December 2005 as shown in its latest published annual report.

On 14 March 2006, China Strategic, Hanny and certain other parties announced the Group Restructuring (see Note 16), and the Company and Hanny entered into a conditional sale and purchase agreement with an independent third party for the disposal of a 15.32% equity interest in China Strategic (the “Disposal”) by each of the Company and Hanny for a consideration of HK$26,055,000 each. Details of the Group Restructuring of China Strategic and the declaration by the Company of an in specie distribution of the value derived from the Group’s divestment of China Strategic to the Company’s shareholders are set out in note 16.

Upon the completion of the Disposal, the Group’s interest in China Strategic decreased from 29.36% to 14.04%. Accordingly, the Group’s interest in the shares of China Strategic was classified as investments held for trading.

(b) The unlisted investment includes the Group’s 45% equity interest in Nantong Port Group Limited (“Nantong Port Group”), which is a sino-foreign joint venture enterprise registered in the PRC as at 31 March 2007. Nantong Port Group is principally engaged in providing cargo loading and off loading, storage, shipping agent, cargo agent, ship anchoring, ship repairing, port machinery, shipping logistics and ship piloting services in Nantong Port, Jiangsu Province, the PRC. According to an agreement entered into by the Group on 12 August 2005 to participate into the assets reorganisation of Nantong Port Group (the “Assets Reorganisation Agreement”), the Group would inject approximately RMB435 million (approximately HK$433,569,000) in cash into Nantong Port Group in return for a 45% interest in its registered capital.

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At 31 March 2006, Nantong Port Group had not accomplished certain major conditions prescribed in the Assets Reorganisation Agreement, including the assets reorganisation and net assets value due diligence review of Nantong Port Group. As stipulated in the Assets Reorganisation Agreement and certain supplementary agreements entered into with the Nantong Port Group, the Group was not entitled to appropriation of results and voting power of Nantong Port Group until injection of all committed capital contribution into Nantong Port Group. In this regard, the amount incurred and paid to Nantong Port Group of approximately HK$160,211,000 as at 31 March 2006 should be reclassified from interests in associates to deposit for acquisition of an associate. Comparative figures have been restated accordingly and had no material impact on the profit for the year 31 March 2006. Such amount represented an earnest money deposit paid by the Group to Nantong Port Group at 31 March 2006.

In September 2006, upon fulfilment of certain conditions as stated in the Assets Recognisation Agreement, the Group had completed the capital contribution and recognised Nantong Port Group as an associate. Discount arising on the acquisition of approximately HK$144,679,000, being the excess in the Group’s share of the fair value of Nantong Port Group’s net identifiable assets over the cost of acquisition, has been recognised in the consolidated income statement in the determination of the Group’s share of results of Nantong Port Group during the current year.

The financial year end date of one of the principal associates is 31 December and it is the latest financial information that available to the Group. Accordingly, the Group’s share of interest in this principal associate at 31 March 2007 is calculated based on the net assets of it at 31 December 2006 and the post-acquisition results.

Summarised financial information in respect of that associate is set out below:

Post-acquisition results: Turnover Profit for the year Group’s share of profit Financial position: Total assets Total liabilities Minority interests Net assets Group’s share of the associate’s net assets	HK$’000 129,383 12,011 5,405 31.12.2006 HK$’000 2,668,100 (1,333,452 ) (364 ) 1,334,284 600,428

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FINANCIAL INFORMATION OF THE PYI GROUP

The combined summarised financial information in respect of the Group’s other associates is set out below:

	2007	2006
	HK$’000	HK$’000
		(restated)
Financial position:
Total assets	451,533	2,171,338
Total liabilities	(272,901 )	(476,899 )
Minority interests	(2,016 )	(330,255 )
Net assets	176,616	1,364,184

Group’s share of associates’ net assets	109,806	411,457

Post-acquisition results:
Turnover	26,513	73,894
Profit (loss) for the year	150,795	(93,006 )

Group’s share of profit (loss) of
associates for the year	73,465	(17,184 )

The Group has discontinued recognition of its share of loss of one of the associates. The amounts of unrecognised
share of loss of that associate, extracted from the relevant management accounts of the associate, both for the year
and cumulatively, are as follows:

Unrecognised share of profit (loss) of the associate for the year Accumulated unrecognised share of losses of the associate	2007 HK$’000 1,591 (51,000 )	2006 HK$’000 (8,955 )

		(52,591 )

Particulars of the Group’s principal associates at 31 March 2007 are set out in note 57(b).

26. INTERESTS IN JOINTLY CONTROLLED ENTITIES

Cost of unlisted investments in jointly controlled entities Share of post-acquisition profits, net of dividends received	2007 HK$’000 – 1,928 1,928	2006 HK$’000 – 2,570
		2,570

138

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

The combined summarised financial information in respect of the Group’s jointly controlled entities is set out below:

Total assets Total liabilities Net assets Group’s share of net assets of jointly controlled entities Turnover (Loss) profit for the year Group’s share of (loss) profit of jointly controlled entities for the year	2007 HK$’000 11,437 (7,580 ) 3,857 1,928 7,798 (1,283 ) (642 )	2006 HK$’000 9,607 (4,466 )
		5,141

		2,570

		5,481 62

		26

Particulars of the Group’s principal jointly controlled entity at 31 March 2007 are set out in note 57(c).

27. AVAILABLE-FOR-SALE INVESTMENTS

Listed equity securities in Hong Kong in overseas Market value of listed securities	2007 HK$’000 732 580 1,312 1,312	2006 HK$’000 1,064 589
		1,653

		1,653

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APPENDIX I

28. LOANS RECEIVABLE

The amounts bear interest at the following rates: Interest free 2% per annum_(Note)_ 15% per annum 20% per annum 0.25% over HKBLR 2% over HKBLR Total amount Less: Amount due within one year shown under current assets Amount due after one year Analysed as: Secured Unsecured	2007 HK$’000 1,508 30,956 150,000 30,000 – – 212,464 (181,508 ) 30,956 181,508 30,956 212,464	2006 HK$’000 1,508 – – – 100,000 4,378 105,886 (105,886 ) – 1,508 104,378 105,886

Hong Kong Best Lending Rate (“HKBLR”) represents Hong Kong Dollar Best Lending Rate as quoted by a designated bank.

Note: During the year, the Group subscribed a convertible bond with an aggregate face value of HK$36,858,000 as a result of the Group Restructuring in note 16. The coupon interest of the convertible bond is 2% per annum with maturity in June 2011. The carrying amount represents the debt element of the convertible bond. The amount recognised is based on the valuation performed by Greater China Appraisal Limited (“GCA”), an independent professional valuer not connected with the Group, using an effective interest rate of 6.47% per annum.

140

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

29. AMOUNTS DUE FROM RELATED COMPANIES

Unsecured loans receivable: Subsidiaries of ITC Corporation Limited (“ITC”) (note (a) below) Associate of ITC_(note (a) below) Associates of China Strategic (note (a) below) Other related companies(note (b) below) Other receivables: Associate of ITC (note (a) below) Associates of China Strategic (note (a) below) Other related companies(notes (a) _and (b) below) Subsidiaries of ITC_(note (a) below) Total, amount due within one year shown under current assets _Notes:	2007 HK$’000 141,401 – – – 141,401 489 – 885 7,324 150,099	2006 HK$’000 – 183,046 47,270 854
		231,170 15,807 2,779 2,096 –
		251,852

(a) The companies are related companies of the Group as ITC has significant influence over the companies and they are under common directorship. ITC is the substantial shareholder of the Company.

The amounts are unsecured, repayable on demand and interest free except for loans receivable of HK$141,401,000 (2006: HK$230,316,000) which bear interest at 2% over HKBLR.

(b) The balance includes loan and interest receivable of HK$885,000 (2006: HK$854,000) from Parona Limited, a shareholder of an associate, in which certain close family members of a director of the Company, have an interest. The amount is secured by shares of the associate held by Parona Limited, interest free (2006: bore interest at 7% per annum) and repayable on demand.

141

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APPENDIX I

30. AMOUNTS DUE FROM ASSOCIATES

Promissory note with face value of HK$117,000,000 carrying interest at 0.75% over Hong Kong Interbank Offered Rate, secured by the shares of certain subsidiaries of an associate and wholly repayable on or before January 2009_(Note)_ Unsecured other receivables, interest free and repayable within one year Unsecured loans receivable carrying interest at 2% over HKBLR on loan principal and repayable within one year Less: Amount due within one year shown under current assets Amount due after one year	2007 HK$’000 117,000 70,314 – 187,314 (187,314 ) –	2006 HK$’000 117,000 64,804 162,972
		344,776 (227,776 )
		117,000

Note: The effective interest rate is 5.17% for the year ended 31 March 2007. Subsequent to balance sheet date, that associate had disposed of its property interests through disposal of an associate and certain proceeds were used to fully repay the amount due to the Group.

31. DEFERRED CONSIDERATION RECEIVABLE

As part of the consideration for the disposal of the subsidiaries as set out in note 47, a deferred consideration of HK$15,000,000 will be settled in cash by the purchaser under four annual instalments commencing from 30 October 2006. The fair value of the deferred consideration at date of initial recognition is determined based on the estimated future cash flows discounted at 3% per annum. The amount is unsecured and interest free. The carrying amounts are analysed for reporting purpose as follows:

Non-current assets Current assets (included in debtors, deposits and prepayments)	2007 HK$’000 6,597 3,932 10,529	2006 HK$’000 10,223 3,932
		14,155

142

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

32. AMOUNTS DUE FROM (TO) CUSTOMERS FOR CONTRACT WORKS

Contracts in progress at the balance sheet date: Contract costs incurred to date Recognised profits less recognised losses Less: Progress billings Represented by: Amounts due from customers for contract works Amounts due to customers for contract works	2007 HK$’000 43,566,229 1,217,200 44,783,429 (45,598,340 ) (814,911 ) 223,637 (1,038,548 ) (814,911 )	2006 HK$’000 42,500,091 1,052,894
		43,552,985 (43,819,221 )
		(266,236 )

		163,379 (429,615 )
		(266,236 )

33. DEBTORS, DEPOSITS AND PREPAYMENTS

The Group’s credit terms for its management contracting segment are negotiated at terms determined and agreed with its customers. Credit term for property leasing business is payable monthly in advance and the credit terms granted by the Group to other debtors normally range from 30 days to 90 days.

Included in debtors, deposits and prepayments are debtors of approximately HK$1,003,440,000 (2006: HK$572,798,000) and their aged analysis is as follows:

Within 90 days More than 90 days and within 180 days More than 180 days	2007 HK$’000 935,095 19,346 48,999 1,003,440	2006 HK$’000 504,584 13,704 54,510
		572,798

At 31 March 2007, retentions held by customers for contract works amounting to approximately HK$477,403,000 (2006: HK$396,066,000) were included in debtors, deposits and prepayments, of which approximately HK$239,707,000 (2006: HK$151,168,000) are expected to be recovered or settled after more than twelve months from the balance sheet date.

Included in deposits and prepayments is an amount of approximately HK$176,753,000 (2006: HK$148,699,000) which carries interest at 14.4% per annum (2006: 13.6%) and is secured by properties interest in the PRC.

At 31 March 2007, an amount of A$22,743,000 (2006: A$24,988,173) is denominated in currencies other than the functional currency of the relevant group entity.

143

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

34. CONVERSION OPTION EMBEDDED IN LOAN RECEIVABLE

The Group had classified the debt element of the convertible bond as loans receivable and the conversion option element separately. The fair value of the convertible bond is determined by the directors of the Company with reference to the valuation performed by GCA. GCA applied net present value and Black-Scholes model for the valuation of the debt element and conversion option element, respectively, at the date of inception. The conversion option is separated as derivative financial instrument and stated in the consolidated balance sheet at fair value. The change in fair value had been recognised in the consolidated income statement.

35. INVESTMENTS HELD FOR TRADING

Listed equity securities, at quoted bid price in Hong Kong in overseas	2007 HK$’000 129,496 26,287 155,783	2006 HK$’000 161,693 –
		161,693

36. PLEDGED BANK DEPOSITS, SHORT TERM BANK DEPOSITS AND BANK BALANCES AND CASH

Pledged bank deposits represent deposits pledged to banks to secure general banking facilities granted to the Group. Deposits amounting to HK$42,601,000 (2006: HK$118,622,000) have been pledged to secure general banking facilities with maturity within one year of the balance sheet date and are therefore classified as current assets.

The pledged bank deposits and short term bank deposits with maturity date of less than three months carry floating interest rates ranging from 2.5% to 4.5% (2006: 3.1% to 4.4%) per annum. The bank balances carry interest rates ranging nil to 3.0% (2006: 3.1%) per annum.

37. CREDITORS AND ACCRUED EXPENSES

Included in creditors and accrued expenses are trade creditors of approximately HK$351,026,000 (2006: HK$347,160,000) and their aged analysis is as follows:

Within 90 days More than 90 days and within 180 days More than 180 days	2007 HK$’000 329,211 8,230 13,585 351,026	2006 HK$’000 312,038 22,037 13,085
		347,160

As at 31 March 2007, included in the creditors and accrued expenses is an amount of A$15,874,000 (approximately HK$100,785,000) that is denominated in currencies other than functional currency of the relevant group entity.

At 31 March 2007, retentions held by the Group for contract works amounting to approximately HK$319,098,000 (2006: HK$297,869,000) were included in creditors and accrued expenses, of which approximately HK$102,719,000 (2006: HK$80,174,000) are expected to be paid or settled after more than twelve months from the balance sheet date.

38. AMOUNTS DUE TO ASSOCIATES

The amounts are unsecured, interest free and repayable on demand.

144

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

39. AMOUNTS DUE TO MINORITY SHAREHOLDERS

The amounts are unsecured, interest free and repayable on demand.

40. LOANS FROM MINORITY SHAREHOLDERS

The amount is unsecured and carries interest at the following rates:

2% below Hong Kong Prime rate_(Note)_ Interest-free Total, under current liabilities	2007 HK$’000 – – –	2006 HK$’000 88,588 34,851
		123,439

Note: During the year 31 March 2007, upon the acquisition of additional interests in subsidiaries, the amount had been reclassified to other loans.

41. BANK AND OTHER BORROWINGS

Bank and other borrowings comprise: Bank loans Other loans Bank overdrafts Analysed as: Secured Unsecured The bank and other borrowings are repayable as follows: Within one year or on demand More than one year, but not exceeding two years More than two years, but not exceeding three years More than three years, but not exceeding four years More than four years, but not exceeding five years More than five years Less: Amount due within one year or on demand shown under current liabilities Amount due after one year	2007 HK$’000 943,554 60,151 20,432 1,024,137 644,968 379,169 1,024,137 597,386 116,157 11,551 64,481 74,481 160,081 1,024,137 (597,386 ) 426,751	2006 HK$’000 471,383 93,400 –
		564,783

		397,319 167,464
		564,783

		400,158 26,500 132,500 4,500 1,125 –
		564,783 (400,158 )
		164,625

145

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

The above bank borrowings include fixed-rate borrowings of approximately HK$161,616,000 (2006: HK$107,454,000) repayable within one year carrying interest ranging from 6.12% to 7.344% (2006: 5.22% to 6.138%) per annum.

The remaining bank borrowings carry floating-rate interest, ranging from 4.67% to 7.75% (2006: 4.71% to 6.56%) per annum.

42. DEFERRED TAXATION

The following are the major deferred tax liabilities (assets) recognised and movements thereon during the current and prior years:

Accelerated tax depreciation HK$’000 At 1 April 2005 32,138 (Credit) charge to income statement (562 ) On disposal of subsidiaries (27,815 ) At 31 March 2006 3,761 Exchange realignment – On acquisition of a business – Change in tax rate credited to income statement – (Credit) charge to income statement 1,484 At 31 March 2007 5,245	Fair value adjustment Recognition on project Tax of contracting under losses income development HK$’000 HK$’000 HK$’000 (6,488 ) (4,323 ) 900,000 1,711 2,461 – 2,872 6 – (1,905 ) (1,856 ) 900,000 – – 82,156 – – – – – (55,952 ) (2,253 ) 769 – (4,158 ) (1,087 ) 926,204	Fair value adjustments on certain non-current assets HK$’000 – – – – 709 28,212 (6,714 ) (487 ) 21,720	Others HK$’000 13 (116 ) 103 – – – – – –	Total HK$’000 921,340 3,494 (24,834 ) 900,000 82,865 28,212 (62,666 ) (487 ) 947,924

At 31 March 2007, the Group has unused tax losses of approximately HK$1,001,000,000 (2006: HK$1,153,000,000) available for offset against future taxable profits. A deferred tax asset has been recognised in respect of approximately HK$24,000,000 (2006: HK$11,000,000) of such losses. No deferred tax asset in respect of the remaining tax losses has been recognised due to the unpredictability of future profit streams on those subsidiaries. The unused tax losses may be carried forward indefinitely.

146

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

43. SHARE CAPITAL

Ordinary shares of HK$0.10 each: Authorised: At 1 April 2005, 31 March 2006 and 31 March 2007 Issued and fully paid: At 1 April 2005 Issue of new shares pursuant to scrip dividend schemes Issued of shares under share option scheme Shares repurchased At 31 March 2006 Issue of new shares Issue of new shares pursuant to scrip dividend schemes Issued of shares under share option scheme Shares repurchased At 31 March 2007	Number of shares 3,000,000,000 1,369,195,436 20,110,474 14,000 (10,520,000 ) 1,378,799,910 68,500,000 9,838,497 36,575,000 (2,000,000 ) 1,491,713,407	Value HK$’000 300,000

		136,920 2,011 1 (1,052 )
		137,880 6,850 984 3,657 (200 )
		149,171

During the year, the following changes in the Company’s share capital took place:

(a) Pursuant to the scrip dividend schemes which were announced by the Company on 18 September 2006 and 11 January 2007, the Company issued 6,523,256 (2006: 8,865,284) and 3,315,241 (2006: 11,245,190) new ordinary shares of HK$0.1 each in the Company to shareholders who elected to receive scrip dividends in respect of the final dividend for the year ended 31 March 2006 and the interim dividend for the six months ended 30 September 2006, respectively. These shares rank pari passu with the then existing shares in all respects.
(b) During the year, the Company issued 36,575,000 ordinary shares of HK$0.10 each at the subscription price ranging from HK$1.24 to HK$2.50 (2006: HK$1.78) under the share option scheme of the Company.
(c) The Company repurchased a total of 2,000,000 ordinary shares through the Hong Kong Stock Exchange as follows:

				Aggregate
	Ordinary shares	Price per share		consideration
Month of repurchase	of HK$0.1 each	Highest	Lowest	paid
		HK$	HK$	HK$’000
August 2006	1,000,000	2.18	2.16	2,178
September 2006	1,000,000	2.27	2.18	2,203
	2,000,000			4,381

(d) On 8 May 2006, the Company issued and allotted 68,500,000 ordinary shares at a fair price of HK$2.91315 per share to a then minority shareholder of a 90.1% owned subsidiary of the Company, which is holding the investment in the Yangkou Port project. The allotted shares represent the consideration paid by the Group to acquire the remaining 9.9% interest in that subsidiary from the minority shareholder. Details of the above transaction are set out in the Company’s announcement dated 11 April 2006.

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FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

44. SHARE-BASED PAYMENT TRANSACTIONS

The maximum number of shares which may initially be issued upon the exercise of all options to be granted under the Share Option Scheme and any other share option scheme(s) adopted by the Company must not in aggregate exceed 10% of the total number of issued shares of the Company as at its adoption date, i.e. 103,674,492 shares. Subject to the approval of the shareholders of the Company in general meeting, the limit may be refreshed to 10% of the total number of shares in issue as at the date of approval by the shareholders of the Company in general meeting. Notwithstanding the foregoing, the maximum number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option scheme(s) of the Company must not in aggregate exceed 30% of the total number of shares in issue from time to time. Pursuant to an ordinary resolution passed at the annual general meetings of the Company in 2003, 2004 and 2005, the 10% scheme limit was refreshed to 10% of the total number of issued shares of the Company as at the respective dates of such meetings. Pursuant to an ordinary resolution passed at the Company’s annual general meeting held on 8 September 2006, the 10% scheme limit was further refreshed to 146,260,991, representing 10% of the total number of issued shares of the Company as at the date of such meeting.

The maximum number of shares of the Company in respect of which options may be granted to each Eligible Person under the Share Option Scheme and any other share option scheme(s) of the Company (including those exercised, cancelled and outstanding options) in any 12-month period shall not exceed 1% of the total number of shares in issue from time to time unless such grant has been duly approved by shareholders of the Company at general meeting at which the Eligible Person and his associates (as defined in the Listing Rules) abstain from voting. Options granted to a substantial shareholder and/or an independent non-executive director or any of their respective associates (as defined in the Listing Rules) in any 12-month period in excess of 0.10% of total number of shares in issue and have an aggregate value exceeding HK$5,000,000 must be approved by the shareholders of the Company in general meeting in advance.

(a) Details of the share options granted on 28 December 2004 to certain directors and advisers of the Company under the Share Option Scheme and movements in such holdings during the year are as follows:

Exercise Date of grant Exercisable period price HK$ 28.12.2004 28.12.2004 to 26.8.2012 1.24 28.12.2004 28.12.2004 to 26.8.2012 1.50	Number of shares of the Company to be issued upon exercise of the share options	Number of shares of the Company to be issued upon exercise of the share options	Number of shares of the Company to be issued upon exercise of the share options
	Outstanding at 1.4.2005 and 31.3.2006 22,100,000 22,100,000 44,200,000	Exercised during the year (13,650,000 ) (9,520,000 ) (23,170,000 )	Outstanding at 31.3.2007 8,450,000 12,580,000
			21,030,000

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FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Pursuant to the ordinary resolution passed by the Company’s shareholders at the special general meeting held on 14 February 2006, the Company repriced the share options by a reduction of the exercise price by HK$0.70 per share to take into account the payment of a special cash dividend of HK$0.70 per share during the year ended 31 March 2006. The fair values of the outstanding share options immediately before and after the modification of their exercise price were calculated by RHL Appraisal Limited, a valuer not connected with the Group, using the Black-Scholes Option Pricing Model (the “Model”). The directors, by reference to the valuation report and after taking other professional advice, considered that the modification did not result in an increase in fair values of the share options. Accordingly, no adjustment on fair values of the share options was required.

The Model is one of the commonly used models to estimate the fair values of the option. The value of an option varies with different variables of certain subjective assumptions. Any changes in the variables so adopted may materially affected the estimation of the fair value of an option.

(b) Details of the share options granted to certain directors and employees of the Group under the Share Option Scheme during the period from 1 April 2005 to 31 March 2007 and movements in such holdings are as follows:

		Number of shares of the Company to be issued upon exercise of the share options	Number of shares of the Company to be issued upon exercise of the share options	Number of shares of the Company to be issued upon exercise of the share options	Number of shares of the Company to be issued upon exercise of the share options
Granted during the year ended 31.3.2006 8,325,000 8,325,000 8,325,000 8,325,000 3,000,000 3,000,000 3,000,000 3,000,000 – – – – – – – – – – – – – – – – 45,300,000	Exercised during the year ended 31.3.2006 (14,000) – – – – – – – – – – – – – – – – – – – – – – – (14,000)	Outstanding at 31.3.2006 8,311,000 8,325,000 8,325,000 8,325,000 3,000,000 3,000,000 3,000,000 3,000,000 – – – – – – – – – – – – – – – – 45,286,000	Granted during the year ended 31.3.2007 – – – – – – – – 4,600,000 4,600,000 4,600,000 1,300,000 4,750,000 1,500,000 1,500,000 1,500,000 1,500,000 2,750,000 2,000,000 1,300,000 2,500,000 1,020,000 1,190,000 1,190,000 37,800,000	Exercised during the year ended 31.3.2007 (8,286,000) (895,000) – – (2,874,000) (50,000) – – – – – – (1,300,000) – – – – – – – – – – – (13,405,000)	Lapsed during the year ended 31.3.2007 (25,000) (275,000) (650,000) (650,000) (126,000) – – – – – – – – – – – – – – – – – – – (1,726,000)	Outstanding at 31.3.2007 – 7,155,000 7,675,000 7,675,000 – 2,950,000 3,000,000 3,000,000 4,600,000 4,600,000 4,600,000 1,300,000 3,450,000 1,500,000 1,500,000 1,500,000 1,500,000 2,750,000 2,000,000 1,300,000 2,500,000 1,020,000 1,190,000 1,190,000
						67,955,000

						24,275,000

149

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

(b) During the year, the Company granted 37,800,000 share options to directors and employees at exercise prices ranging from HK$2.43 to HK$4.00. The fair value of the share options granted during the year is approximately HK$25,031,000. The share options granted are subject to vesting conditions from zero to two years.

The fair values determination at the grant date were carried out by RHL Appraisal Limited using the Model. The inputs into the Model were summarised as follows:

	Type	Type	Type	Type	Type	Type	Type	Type
	(i)	(ii)	(iii)	(iv)	(v)	(vi)	(vii)	(viii)
Date of grant	6.2.2006	6.2.2006	6.2.2006	6.2.2006	24.3.2006	24.3.2006	24.3.2006	24.3.2006
Closing share price at
date of grant_(HK$)_	1.78	1.78	1.78	1.78	2.325	2.325	2.325	2.325
Exercise price_(HK$)_	1.78	2.50	3.00	3.50	2.325	2.50	3.00	3.50
Expected volatility	48%	48%	48%	48%	48%	48%	48%	48%
Expected life_(year)_	1	2	3	4	0.87	1.87	2.87	3.87
Risk-free interest rate	3.85%	3.88%	3.97%	4.05%	4.215%	4.252%	4.310%	4.390%
Expected annual
dividend yield	1.69%	1.69%	1.69%	1.69%	1.3%	1.3%	1.3%	1.3%
Fair value per
share option_(HK$)_	0.347	0.287	0.311	0.336	0.432	0.570	0.583	0.608
Total fair value_(HK$’000)_	2,889	2,391	2,587	2,794	1,296	1,709	1,749	1,823
	Type	Type	Type	Type	Type	Type	Type	Type
	(ix)	(x)	(xi)	(xii)	(xiii)	(xiv)	(xv)	(xvi)
Date of grant	8.9.2006	8.9.2006	8.9.2006	8.9.2006	8.9.2006	8.9.2006	8.9.2006	8.9.2006
Closing share price at
date of grant_(HK$)_	2.43	2.43	2.43	2.43	2.43	2.43	2.43	2.43
Exercise price_(HK$)_	2.48	2.48	2.48	2.43	2.43	2.43	2.43	3.00
Expected volatility	54%	54%	54%	54%	54%	54%	54%	54%
Expected life_(year)_	1	2	3	3	1	1.90	2.90	1.90
Risk-free interest rate	3.740%	3.821%	3.907%	3.907%	3.740%	3.821%	3.907%	3.821%
Expected annual
dividend yield	1.2%	1.2%	1.2%	1.2%	1.2%	1.2%	1.2%	1.2%
Fair value per
share option_(HK$)_	0.515	0.731	0.888	0.903	0.534	0.730	0.889	0.557
Total fair value_(HK$’000)_	2,367	3,364	4,085	1,174	2,537	1,095	1,334	836
	Type	Type	Type	Type	Type	Type	Type	Type
	(xvii)	(xviii)	(xix)	(xx)	(xxi)	(xxii)	(xxiii)	(xxiv)
Date of grant	8.9.2006	8.9.2006	8.9.2006	6.2.2007	6.2.2007	6.2.2007	6.2.2007	6.2.2007
Closing share price at
date of grant_(HK$)_	2.43	2.43	2.43	3.00	3.00	3.00	3.00	3.00
Exercise price_(HK$)_	3.50	3.00	3.50	3.00	4.00	3.00	3.00	3.50
Expected volatility	54%	54%	54%	45%	45%	45%	45%	45%
Expected life_(year)_	2.90	2	3	3	1	1	2	3
Risk-free interest rate	3.907%	3.821%	3.907%	4.148%	4.050%	3.900%	4.086%	4.135%
Expected annual
dividend yield	1.2%	1.2%	1.2%	1%	1%	1%	1%	1%
Fair value per
share option_(HK$)_	0.621	0.577	0.638	0.980	0.264	0.564	0.803	0.823
Total fair value_(HK$’000)_	932	1,588	1,275	1,274	660	575	956	979

The expected volatility used in the Model was determined by using the annualised standard derivation of the continuously compounded rate of return on the ordinary shares of the Company. The expected life used in the Model has been adjusted, based on management’s best estimate, for the effects of non transferability and behavioural considerations.

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The amount of cost of share options charged to the consolidated income statement during the year was HK$21,995,000 (2006: HK$4,945,000).

In respect of the share options granted during the year, the closing share price immediately before date of grant is ranged from HK$2.43 to HK$3.00.

In respect of the 36,575,000 share options exercised during the year, the weighted average share price at the date of exercise is HK$3.04 and the weighted average share price at the date immediately before exercise date is HK$2.99.

There was no consideration received during the year from Eligible Persons for taking up the options granted.

Share option scheme of Paul Y. Engineering Group Limited (“PYE”)

The maximum number of shares that may initially be issued upon the exercise of all options to be granted under the PYE Scheme and any other share option scheme(s) adopted by PYE must not in aggregate exceed 10% of the total number of issued shares of PYE, i.e. 57,669,939 shares of PYE, as at its adoption date. Subject to the approval of the shareholders of PYE in general meeting, the limit may be refreshed to 10% of the total number of shares of PYE in issue as at the date of approval by the shareholders of PYE in general meeting. Notwithstanding the forgoing, the maximum number of shares of PYE which may be issued upon exercise of all outstanding options granted and yet to be exercised under the PYE Scheme and any other share option scheme(s) of PYE must not in aggregate exceed 30% of the total number of shares of PYE in issue from time to time. Pursuant to an ordinary resolution passed at PYE’s annual general meeting held on 6 September 2006, the 10% scheme limit was refreshed to 58,195,877, representing 10% of the total number of issued shares of PYE as at the date of such meeting.

The maximum number of shares of PYE in respect of which options may be granted to each PYE Eligible Person under the PYE Scheme and any other share option scheme(s) of PYE (including both exercised, cancelled and outstanding options) in any 12-month period shall not exceed 1% of the total number of shares of PYE in issue from time to time unless such grant has been duly approved by shareholders of PYE in general meeting at which the PYE Eligible Person and his associate (as defined in the Listing Rules) abstained from voting. Options granted to a substantial shareholder and/or an independent non-executive director of PYE or any of their respective associates (as defined in the Listing Rules) in any 12-month period in excess of 0.10% of the total number of PYE in issue and have an aggregate value exceeding HK$5,000,000 must be approved by the shareholders of PYE in general meeting in advance.

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Details of movements in share options of PYE granted under the PYE Scheme during the current and prior years are as follows:

	Number of shares of the Company to be issued upon exercise of the share options	Number of shares of the Company to be issued upon exercise of the share options	Number of shares of the Company to be issued upon exercise of the share options	Number of shares of the Company to be issued upon exercise of the share options
Granted during the year ended 31.3.2006 1,500,000 1,500,000 1,500,000 8,000,000 – – – 12,500,000	Outstanding at 31.3.2006 1,500,000 1,500,000 1,500,000 8,000,000 – – – 12,500,000	Granted during the year ended 31.3.2007 – – – – 3,000,000 3,000,000 2,000,000 8,000,000	Exercised during the year ended 31.3.2007 – – – – (1,500,000 ) – – (1,500,000 )	Lapsed during the year ended 31.3.2007 – – – (2,400,000 ) – – – (2,400,000 )	Outstanding at 31.3.2007 1,500,000 1,500,000 1,500,000 5,600,000 1,500,000 3,000,000 2,000,000
					16,600,000

					4,500,000

In respect of the 1,500,000 share options exercised during the year, the weighted average share price at the date of exercise is HK$1.17.

In respect of the share options granted during the year, the closing share price immediately before date of grant is HK$0.99.

The fair values of the share options granted were calculated using the Model carried out by RHL Appraisal Limited. The inputs into the Model were summarised as follows:

	Type	Type	Type	Type	Type	Type	Type
	I	II	III	IV	V	VI	VII
Date of grant	3.2.2006	3.2.2006	3.2.2006	9.2.2006	13.7.2006	13.7.2006	13.7.2006
Closing share price
at date of grant_(HK$)_	0.70	0.70	0.70	0.87	0.98	0.98	0.98
Exercise price_(HK$)_	0.70	0.85	1.00	0.90	1.00	1.00	1.00
Expected volatility	38%	38%	38%	38%	52%	52%	52%
Expected life (year)	2.5	2.9	4	2.5	0.8	2.0	2.5
Risk-free interest rate	3.93%	3.92%	4.06%	4.06%	4.32%	4.49%	4.53%
Expected annual
dividend yield	8.57%	8.57%	8.57%	8.57%	8.16%	8.16%	8.16%
Fair value per share
option_(HK$)_	0.109	0.079	0.067	0.129	0.163	0.226	0.239

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The total estimated fair value of approximately HK$1,088,000 (2006: HK$137,000) with respect to share options granted to directors and employees of PYE were charged to the consolidated income statement during the year.

45. ACQUISITION OF BUSINESS

Pursuant to an agreement dated 12 May 2006 (the “Agreement”), the Group acquired from an independent third party assets and gas and oil logistics and distribution operations across Wuhan, the PRC, at a total consideration of approximately RMB470 million. This transaction has been accounted for using the purchase method of accounting and has been completed in September 2006. The net assets acquired in the transaction is summarised as follows:

Net assets acquired: Property, plant and equipment Fair value adjustment on leasehold land Other intangible assets – rights of operation Other intangible assets – customer base Prepaid lease payments Deferred tax liability Discount on acquisition of business Satisfied by: Cash consideration paid Transaction costs paid Deferred consideration payable_(Note)_ Unsettled transaction costs included in creditors and accrued expenses Net cash outflow arising on acquisition: Cash consideration and transaction costs paid	Carrying amount before business combination HK$’000 419,317 – – – 45,522 – 464,839	Fair value adjustments HK$’000 38,327 9,210 35,923 2,032 – (28,212 ) 57,280	Fair value HK$’000 457,644 9,210 35,923 2,032 45,522 (28,212 ) 522,119 (3,755 ) 518,364 344,828 24,434 118,227 30,875 518,364 369,262

Note: Pursuant to the Agreement, part of the consideration (RMB120 million) will be settled by way of issue of the 3-year, zero coupon, HK$ denominated convertible notes by the Company at a conversion price of HK$4.25 per share. Upon maturity, the redemption amount is 114.167% of the par value. As at 31 March 2007, the convertible notes have not yet issued and the unpaid consideration of HK$121,213,000 is presented as deferred consideration payable in consolidated balance sheet.

As the Group has no obligations to settle the unpaid consideration within twelve months of the balance sheet date, the amount is classified as non-current liabilities.

Subsequent to the balance sheet date, an amount of approximately HK$121,522,000 (equivalent to RMB120 million) convertible notes have been issued.

The business acquired during the year recorded a loss of HK$8,702,000 between the date of acquisition and the balance sheet date.

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APPENDIX I

46. ACQUISITION OF SUBSIDIARIES

During the year ended 31 March 2006, the Group acquired certain wholly-owned subsidiaries which are engaged in holding of motor vehicles registration marks. The acquisition has been accounted for by the purchase method of accounting. The effect of the acquisition is summarised as follows:

Net assets acquired: Debtors, deposits and prepayments Other intangible assets Creditors and accrued expenses Total consideration, representing cash consideration and net cash outflow	2006 HK$’000 202 973 (975 ) 200

The subsidiaries acquired did not make any significant impact on the Group’s results and cash flows for the prior year.

47. DISPOSAL OF SUBSIDIARIES

During the year ended 31 March 2006, the Group disposed of the following subsidiaries:

(a) On 8 June 2005, the Group disposed of its entire equity interest in Technico Investments Limited (“Technico”) at a consideration of approximately HK$13.2 million, with HK$9.3 million in cash and HK$3.9 million as a deferred consideration. Technico owned a property in Taishan, the PRC.
(b) On 20 July 2005, the Group disposed of its entire equity interest in Time First Investments Limited and its wholly-owned subsidiary (“Time First group”) at a cash consideration of HK$26.3 million. Time First group was engaged in the property development and sale in Taishan, the PRC.
(c) On 12 September 2005, the Group disposed of its entire equity interest in Skylink Enterprises Limited (“Skylink”) at a consideration of HK$25 million, with HK$22 million in cash and HK$3 million as deferred consideration. Skylink owned a property in Taishan, the PRC.
(d) On 26 September 2005, the Group disposed of its entire equity interest in Redcliff Property Corp. (“Redcliff”) at a cash consideration of HK$17.7 million. Redcliff was engaged in the property development and sale of a property in Taishan, the PRC.
(e) On 4 October 2005, the Group disposed of its entire interest in Well Cycle Limited (“Well Cycle”) at a cash consideration of approximately HK$1.3 million. Well Cycle owned certain second hand motor vehicles and vehicle registration numbers as its sole business and assets.
(f) On 20 January 2006, the Group disposed of its 100% interest in Linkport Holdings Limited and its two wholly-owned subsidiaries (“Linkport group”) to an associate of the Group at an agreed value of the property of HK$780 million, with adjustments of HK$14 million being deducted on completion according to agreement, with HK$649 million in cash and HK$117 million as a deferred consideration which will in turn be settled in cash on or before 20 January 2009. Linkport group owned an investment property located in Hong Kong as its sole business and asset.
(g) On 27 January 2006, the Group disposed of its 100% interest in Darierian Limited and its two whollyowned subsidiaries (“Darierian group”) to a wholly-owned subsidiary of ITC at a cash consideration of HK$3.5 million. Darierian group owned certain second hand motor vehicles, vehicle registration numbers and a golf club corporate membership as its sole business and assets.
(h) On 31 March 2006, the Group disposed of its 100% interest in Bakersfield Trading Limited and its two wholly-owned subsidiaries (“Bakersfield group”) at a cash consideration of HK$55 million. Bakersfield group owned a motor vessel and wet berth as its sole business and asset.

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FINANCIAL INFORMATION OF THE PYI GROUP

(i) On 30 October 2005, the Group disposed of certain subsidiaries which were engaged in manufacturing and trading of concrete products. The consideration for the disposal is HK$19 million which will be settled in cash of HK$4 million and a deferred consideration of HK$15 million by the purchaser on or before October 2009.

Net assets disposed of:
Property, plant and equipment
Investment properties
Prepaid lease payments
Other intangible assets
Debtors, deposits and prepayments
Properties held for sale
Bank balances and cash
Creditors and accrued expenses
Taxation payable
Deferred tax liabilities
Expenses incurred on disposal
Gain on disposal
Total consideration
Satisfied by:
Cash
Consideration receivable (included in debtors,
deposit and prepayments)
Promissory note
Deferred consideration
Net cash inflow arising on disposals:
Cash received
Cash and cash equivalents disposed of

2006
HK$’000
152,346
540,400
108,378
8,419
25,052
93,828
5,891
(56,661 )
(1,219 )
(24,834 )
851,600
9,755
60,756
922,111
788,131
3,000
117,000
13,980
922,111
788,131
(5,891 )
782,240

As part of the consideration of the disposal of the subsidiaries, a deferred consideration of HK$15,000,000 is to be settled in cash by the purchaser under four annual instalments commencing from 30 October 2006. The fair value of the deferred consideration at date of initial recognition is determined based on estimated future cash flows discounted at 3% per annum.

The subsidiaries disposed of during the prior year contributed approximately HK$37,182,000 to the Group’s turnover and a gain of approximately HK$74,997,000 to the Group’s results for that year.

48. MAJOR NON-CASH TRANSACTIONS

The Group had the following major non-cash transactions:

(a) New shares were issued as scrip dividends during the year as set out in notes 16 and 43;

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APPENDIX I

(b) During the year, the Company issued and allotted 68,500,000 ordinary shares for the acquisition of additional interests in subsidiaries; and
(c) During the year, the Company declared a special dividend by way of distribution of the value derived from the Group’s divestment of an associate. The amount distributed was approximately HK$325,660,000.

49. RETIREMENT BENEFIT SCHEMES

The Group operates defined contribution retirement benefit schemes for qualifying employees. The assets of the schemes are separately held in funds under the control of trustees.

The cost charged to the consolidated income statement represents contributions payable to the funds by the Group at rates specified in the rules of the schemes. Where there are employees who leave the schemes prior to vesting fully in the contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions.

50. CONTINGENT LIABILITIES

	2007	2006
	HK$’000	HK$’000
Guarantee given to a bank in respect of banking
facilities granted to an associate	9,454	9,454

51. OPERATING LEASE COMMITMENTS

(a) The Group as a lessee:

At the balance sheet date, the Group had commitments for future minimum lease payments under noncancellable operating leases in respect of rented premises and prepaid lease payments which fall due as follows:

Within one year In the second to fifth year inclusive Over five years	2007 HK$’000 29,766 49,155 4,449 83,370	2006 HK$’000 21,232 60,513 –
		81,745

Leases are negotiated, and monthly rentals are fixed, for terms ranging from two to thirty years.

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APPENDIX I

(b) The Group as a lessor:

At the balance sheet date, the Group had contracted with tenants for future minimum lease payments which fall due as follows:

Within one year In the second to fifth year inclusive	2007 HK$’000 – – –	2006 HK$’000 971 500
		1,471

52. PLEDGE OF ASSETS

At the balance sheet date, the following assets were pledged to banks and financial institutions to secure the general credit facilities granted to the Group:

Property, plant and equipment Prepaid lease payments Intangible assets Bank deposits Properties held for sale Project under development Properties under development	2007 HK$’000 467,615 35,268 7,827 42,601 – 24,137 66,834 644,282	2006 HK$’000 – – – 118,622 78,245 – –
		196,867

In addition, the Group’s benefits under certain construction contracts were pledged to secure the facilities granted.

53. COMMITMENTS

Expenditure contracted for but not provided in the consolidated financial statements in respect of acquisition of: – Property, plant and equipment – Project under development – Properties under development	2007 HK$’000 274,986 1,146,837 98,044 1,519,867	2006 HK$’000 65 91,893 –
		91,958

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FINANCIAL INFORMATION OF THE PYI GROUP

54. RELATED PARTY TRANSACTIONS AND BALANCES

(a) The Group entered into the following transactions with certain related parties during the year:

Class of related party	Nature of transactions	2007	2006
		HK$’000	HK$’000
Associates of	Purchase of concrete products
the Group	by the Group	35	112
	Interest income charged by the Group	8,400	16,437
	Rentals and related building
	management fee charged to the Group	24,958	3,689
	Rentals and consultancy fee charged
	by the Group	2,511	–
	Building manager remuneration
	fee charged by the Group	1,200	248
	Project management fees
	charged to the Group	8,445	–
	Project management fees
	charged by the Group	1,596	6,044
	Net rental guarantee income
	charged by the Group	1,438	–
	Construction works charged
	by the Group	–	383
	Subcontracting fees charged
	to the Group	–	15
Jointly controlled	Subcontracting fees charged
entities of the Group	to the Group	7,798	1,015
	Service fees charged
	by the Group	30	65
	Project management
	fees charged
	by the Group	–	825

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FINANCIAL INFORMATION OF THE PYI GROUP

Class of related party	Nature of transactions	2007	2006
		HK$’000	HK$’000
Subsidiaries of ITC	Purchase of building materials
	by the Group	40	–
	Rental income charged by the Group	48	345
	Service fee charged by the Group	–	25
	Interest income charged by the Group	5,339	–
	Interest charged to the Group	417	–
	Coupon interest of Hanny Bonds entitled
	by the Group	582	–
	Rentals charged to the Group	360	90
	Face value of Hanny Bonds subscribed
	by the Group	36,858	–
	Rentals and related building management
	fee charged by the Group	–	62
	Motor vehicles rental charged to the Group	219	–
Associates of ITC	Interest income charged by the Group	13,461	16,709
	Interest charged to the Group	981	–
	Service fees charged by the Group	109	7
	Service fees charged to the Group	736	–
	Rentals and related building management
	fee charged by the Group	–	1,707
Other related	Rental and related building
companies_(Note)_	management fee charged
	by the Group	17	3,501
	Interest income charged by the Group	925	7,160
	Service fees charged to the Group	1,253	1,920
	Service fees charged by the Group	305	112
	Sales of property, plant
	and equipment by the Group	–	6
Minority shareholder of	Interest charged to the Group	155	8,392
a subsidiary
Company which a	Acquisition of additional interests
member of key	in subsidiaries by the Group	199,551	–
management is a
shareholder

Note: ITC has significant influence over these related companies.

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Short-term benefits Post-employment benefits Share-based payment expense	2007 HK$’000 20,451 557 11,698 32,706	2006 HK$’000 18,525 769 939
		20,233

Details of the share options granted to the directors during the year are set out below:

Exercise Date of price per Name of director grant Exercisable period share HK$ Chow Ming Kuen, Joseph 28.12.2004 28.12.2004 to 26.08.2012 1.24 28.12.2004 28.12.2004 to 26.08.2012 1.50 Lau Ko Yuen, Tom 28.12.2004 28.12.2004 to 26.08.2012 1.24 28.12.2004 28.12.2004 to 26.08.2012 1.50 08.09.2006 08.09.2006 to 07.09.2007 2.48 08.09.2006 08.09.2007 to 07.09.2008 2.48 08.09.2006 08.09.2008 to 07.09.2009 2.48 Kwok Shiu Keung, Ernest 28.12.2004 28.12.2004 to 26.08.2012 1.24 28.12.2004 28.12.2004 to 26.08.2012 1.50 Chan Shu Kin 28.12.2004 28.12.2004 to 26.08.2012 1.24 28.12.2004 28.12.2004 to 26.08.2012 1.50 Leung Po Wing, 08.09.2006 08.09.2006 to 26.08.2012 2.43 Bowen Joseph Li Chang An 06.02.2007 06.02.2007 to 26.08.2012 3.00	Outstanding as at 1.4.2006 650,000 650,000 6,500,000 6,500,000 – – – 650,000 650,000 650,000 650,000 – –	Granted during the year – – – 4,600,000 4,600,000 4,600,000 – – – – 1,300,000 1,300,000	Exercised Outstanding during as at the year 31.3.2007 (650,000 ) – (650,000 ) – – 6,500,000 – 6,500,000 – 4,600,000 – 4,600,000 – 4,600,000 – 650,000 – 650,000 – 650,000 – 650,000 – 1,300,000 – 1,300,000 (1,300,000 ) 32,000,000
	16,900,000	16,400,000

(c) During the year ended 31 March 2006, the Group has acquired certain subsidiaries from the directors of the Company which are engaged in holding of motor vehicles registration marks.

(d) During the year ended 31 March 2006, the Group disposed of certain subsidiaries to an associate of the Group and a wholly-owned subsidiary of ITC. Details of transactions are set out in note 47(f) and (g).

Details of the balances with associates, jointly controlled entities, related companies and minority shareholders at the balance sheet date are set out in notes 29, 30, 38, 39 and 40.

160

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55. BALANCE SHEET OF THE COMPANY

NON-CURRENT ASSET Investment in subsidiaries CURRENT ASSETS Deposits and prepayments Amounts due from subsidiaries Short term bank deposits Bank balances CURRENT LIABILITIES Creditors and accrued expenses Amount due to a subsidiary Bank borrowings NET CURRENT ASSETS NET ASSETS CAPITAL AND RESERVES Share capital Reserves_(Note)_ SHAREHOLDERS’ FUNDS	2007 HK$’000 5 332 2,603,118 105,516 12,355 2,721,321 3,215 900,546 80,000 983,761 1,737,560 1,737,565 149,171 1,588,394 1,737,565	2006 HK$’000 5
		2,829 2,560,441 177,751 31,125
		2,772,146
		4,086 920,303 30,000
		954,389
		1,817,757
		1,817,762

		137,880 1,679,882
		1,817,762

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FINANCIAL INFORMATION OF THE PYI GROUP

Note:

At 1 April 2005 Share repurchased and cancelled Issue of shares under scrip dividend schemes Credit arising on scrip dividends Share issue expenses Recognition of equity-settled share-based payment expense Issue of shares under share option scheme Transfer from capital reserve Loss for the year Distribution At 31 March 2006 Share repurchased and cancelled Issue of shares under scrip dividend schemes Credit arising on scrip dividends Share issue expenses Recognition of equity-settled share-based payment expense Issue of shares under share option scheme Issue of shares upon acquisition of additional interests in subsidiaries Release upon lapse of vested share options Loss for the year Distribution At 31 March 2007	Share premium HK$’000 184,811 (13,426 ) (2,011 ) – (274 ) – 29 – – – 169,129 (4,181 ) (984 ) – (635 ) – 59,597 192,701 – – – 415,627	Capital reserve HK$’000 2,480,000 – – – – – – (2,480,000 ) – – – – – – – – – – – – – –	Share- based payment reserve HK$’000 – – – – – 4,945 (5 ) – – – 4,940 – – – – 22,181 (5,096 ) – (63 ) – – 21,962	Retained profits HK$’000 290,182 – – 29,931 – – – 2,480,000 (296,230 ) (998,070 ) 1,505,813 – – 24,477 – – – – 63 (9,880 ) (369,668 ) 1,150,805	Total HK$’000 2,954,993 (13,426 ) (2,011 ) 29,931 (274 ) 4,945 24 – (296,230 ) (998,070 ) 1,679,882 (4,181 ) (984 ) 24,477 (635 ) 22,181 54,501 192,701 – (9,880 ) (369,668 ) 1,588,394

56. POST BALANCE SHEET EVENTS

Subsequent to the balance sheet date, the Group entered into the following major transactions:

(a) On 13 March 2007, an associate of the Group entered into a conditional agreement regarding the disposal of the associate’s property interest in Paul Y. Centre at a consideration of approximately HK$1,150 million. The transaction was completed in June 2007.

The resultant gain on disposal of the associate’s property interest is insignificant.

(b) In July 2007, a subsidiary of the Group signed a 7- year project loan facility agreement for RMB960 million. The loan bears the current RMB long-term loan benchmark interest rate announced by the People’s Bank of China. The loan is to finance the development of infrastructure projects in Jiangsu Province, the PRC. The loan will be repaid by 24 installments and the final repayment date for the loan is in 2014.

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57. PARTICULARS OF PRINCIPAL SUBSIDIARIES, ASSOCIATES AND JOINTLY CONTROLLED ENTITIES

(a) Particulars of the Company’s principal subsidiaries at 31 March 2007 are as follows:

		Issued and	Percentage of issued	Percentage of issued
		fully paid	share capital/
	Place of	share capital/	registered capital
	incorporation/	registered	held by the	attributable
Name of subsidiary	registration	capital	Subsidiaries	to the Group	Principal activities
			%	%
Corless Limited	British Virgin	US$2	100	63.74	Investment holding
	Islands	ordinary shares
Glory Well Limited	Hong Kong	HK$10,000	100	100	Investment holding
		ordinary shares
Jiangsu Wanhua Real	PRC	US$8,800,000	100	100	Property investment
Estate Development		registered capital
Co., Ltd.		(notes (i) and (vi) below)
Jiangsu YangKou Port	PRC	US$66,650,000	75	75	Port development
Development and		registered capital
Investment Co., Ltd.		(notes (ii) and (vi) below)
Jiangsu Yangtong	PRC	US$13,332,000	75	75	Port development
Investment and		registered capital
Development Co., Ltd.		(note (ii) below)
湖北民生石油液化氣	PRC	US$25,000,000	100	100	LPG distribution and
有限公司		registered capital			logistics
		(note (i) below)
Nation Cheer Investment	Hong Kong	HK$1,200,000	100	100	Securities investment
Limited		ordinary shares			and trading
Paul Y. Building Materials	Hong Kong	HK$2	100	63.74	Trading and installation
Company Limited		ordinary shares			of building materials
Paul Y. Corporation Limited	Hong Kong	HK$2	100	100	Investment holding
		ordinary shares
Paul Y. - CREC(HK)	Hong Kong	–	60	38.24	Civil engineering
Joint Venture		(note (iii) below)
Paul Y. (E & M) Contractors	Hong Kong	HK$20,000,000	99.9998	63.74	Provision of electrical,
Limited		ordinary shares			mechanical and
					building services
Paul Y. Builders Group	Hong Kong	HK$2	100	63.74	Investment holding
Limited		ordinary shares
		HK$1,000,000	–	–
		non-voting
		deferred shares
		(note (iv) below)
Paul Y. Builders Limited	Hong Kong	HK$102,000,000	100	63.74	Building construction
		ordinary shares
Paul Y. Construction &	Hong Kong	HK$42,000,000	100	63.74	Building construction
Engineering Co. Limited		ordinary shares			and civil engineering

163

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

		Issued and	Percentage of issued	Percentage of issued
		fully paid	share capital/
	Place of	share capital/	registered	capital
	incorporation/	registered	held by the		attributable
Name of subsidiary	registration	capital	Subsidiaries	to the Group	Principal activities
			%	%
Paul Y. Engineering Group	Bermuda	HK$294,800,000	63.74	63.74	Investment holding
Limited		ordinary shares
Paul Y. General Contractors	Hong Kong	HK$36,000,000	100	63.74	Building construction
Limited		ordinary shares			and civil engineering
Paul Y. Interior Contractors	Hong Kong	HK$2	100	63.74	Interior decoration
Limited		ordinary shares			works
Paul Y. Plant Hire Limited	Hong Kong	HK$2	100	63.74	Hire of motor vehicles
		ordinary shares			and plant and
					machinery
Paul Y. Construction	Hong Kong	HK$2	100	63.74	Civil engineering,
Company, Limited		ordinary shares			building construction
					and investment
					holding
		HK$50,000,000	–	–
		non-voting
		preferred shares
		(note (v) below)
Paul Y. Construction	PRC	RMB60,000,000	100	63.74	Civil engineering and
(China) Limited		registered capital			building construction
Paul Y. Foundation Holdings	British Virgin	US$1	100	63.74	Investment holding
Limited	Islands	ordinary share
Paul Y. Foundation Limited	Hong Kong	HK$10,000,000	100	63.74	Civil engineering and
		ordinary shares			foundation works
Paul Y. Management	Hong Kong	HK$2	100	63.74	Management and
Limited		ordinary shares			secretarial services
Paul Y. Project Management	Hong Kong	HK$2	100	63.74	Project management
International Limited		ordinary shares			services and
					investment holding
Paul Y. Facilities	Hong Kong	HK$2	100	63.74	Facilities management
Management Co., Limited		ordinary shares			services
PYI Management Limited	Hong Kong	HK$2	100	100	Management services
		ordinary shares
PYI Min Sheng Investment	Hong Kong	HK$2	100	100	Investment holding
Limited		ordinary shares
PYI Xingdong Properties	PRC	US$12,500,000	100	100	Property investment
(Jiangsu) Limited		registered capital
		(notes (i) and (vi) below)

All of the above subsidiaries operate in Hong Kong except Jiangsu Wanhua Real Estate Development Co., Ltd., PYI Xingdong Properties (Jiangsu) Limited, 湖北民生石油液化氣有限公司, Jiangsu Yangtong Investment and Development Co., Ltd., Jiangsu YangKou Port Development and Investment Co., Ltd. and Paul Y. Construction (China) Limited, all of which operate in the PRC.

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FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

All of the above subsidiaries are limited companies except Paul Y. - CREC(HK) Joint Venture which is an unincorporated business. Paul Y. Engineering Group Limited is listed in Hong Kong.

Notes:

(i) Being the wholly-foreign-owned-enterprises.
(ii) Being the sino-foreign equity joint ventures.
(iii) No capital has been contributed by the joint venture partners of the joint venture.
(iv) The holders of the non-voting deferred shares are not entitled to vote, are not entitled to any dividends for any financial year and are, on winding up or otherwise, only entitled out of the surplus assets of the company to a return of the capital after a total sum of HK$100,000,000,000,000 has been distributed to the holders of the ordinary shares of the company.
(v) The holders of the non-voting preferred shares are not entitled to vote, are not entitled to any dividends unless the net profits of the company available for dividend exceed HK$100,000,000,000 in which case they should be entitled to a fixed non-cumulative dividend at the rate of 5% per annum for any financial year and are, on winding up, only entitled out of the surplus assets of the company to a return of the capital after a total sum of HK$10,000,000,000 has been distributed to the holders of the ordinary shares of the company.
(vi) As at 31 March 2007, the registered capital of Jiangsu Wanhua Real Estate Development Co., Ltd., Jiangsu YangKou Port Development and Investment Co., Ltd. and PYI Xingdong Properties (Jiangsu) Limited are paid up to US$7,225,000, US$40,650,000 and US$6,432,000, respectively. The registered capital of all other subsidiaries registered in the PRC are fully paid up as at 31 March 2007.
(b) Particulars of the Company’s principal associates indirectly held by the Company at 31 March 2007 are as follows:

		Issued and	Percentage of
		fully paid	issued share
	Place of	share capital/	capital/registered
	incorporation/	registered	capital attributable
Name of associate	registration	capital	to the Group	Principal activities
			%
CSCEC-Paul Y. Construction	PRC	US$10,000,000	20.0	Civil engineering
Company Limited		registered capital		and building
		(note below)		construction
Gain Resources Limited	British Virgin	US$100	15.9	Investment holding
	Islands	ordinary shares
Nantong Port Group Limited	PRC	RMB966,004,400	45	Port operation
		registered capital
		(note below)
Yangtze Feeder Port	British Virgin	US$1	50	Investment holding
Limited	Islands	ordinary share
Zhong Yu - Paul Y. Project	PRC	US$500,000	25.5	Project management
Management Company		registered capital		and consultancy
Limited		(note below)		services

Note: The company is a sino-foreign equity joint venture company.

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FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

			Percentage of
	Place of	Issued and	issued share
Name of jointly	incorporation/	fully paid	capital attributable
controlled entity	registration	share capital	to the Group	Principal activities
			%
Paul Y. - Penta-Ocean Joint	Hong Kong	–	31.9	Civil engineering
Venture		(Note)

Note: No capital has been contributed by the joint venture partners.

The above tables list the subsidiaries, associates and jointly controlled entity of the Company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries, associates and jointly controlled entities would, in the opinion of the directors, result in particulars of excessive length.

166

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

6. MANAGEMENT DISCUSSION AND ANALYSIS OF THE PYI GROUP FOR THE YEAR ENEDED 31 MARCH 2007

Set out below is the management discussion and analysis of PYI Group for the financial years ended 31 March 2006 and 31 March 2007 as extracted from the annual report of PYI for the year ended 31 March 2007.

MANAGEMENT DISCUSSION AND ANALYSIS

REVIEW OF FINANCIAL PERFORMANCE AND POSITIONS

For the year ended 31 March 2007, the Group recorded a consolidated turnover of about $4,782 million (2006: 3,540 million), representing an increase of about 35% when compared with that of last corresponding year. The increase was mainly attributable to the increase in the Group’s business in management contracting.

Profit before taxation of some $327 million was achieved as compared with some $367 million for last year. The Group’s profit before taxation was composed of:

(i) net gain of about $59 million in management contracting, project management and facilities management businesses (2006: $138 million);
(ii) net gain of about $3 million in LPG distribution (2006: Nil);
(iii) net gain of about $174 million in treasury investment (2006: $80 million);
(iv) net gain of about $14 million in property investment (2006: $12 million);
(v) interest income and other income of about $42 million (2006: $108 million);
(vi) discount on acquisition of LPG business of about $4 million (2006: Nil);
(vii) gain on disposal of interest in an associate of about $5 million (2006: Nil);
(viii) net gain of about $223 million (2006: $10 million) from associates and jointly controlled entities;
(ix) development costs of about $14 million in port and infrastructure development and logistics business (2006: Nil);
(x) net corporate and other expenses of about $159 million (2006: $128 million), of which $23 million (2006: $3 million) was attributed to share-based payment expense for share options granted to directors and employees. Higher corporate costs were employed to support the business expansion and the growing turnover during the year; and
(xi) finance costs of about $24 million (2006: $17 million).

The amount of profit before taxation in last year included increase in fair value of derivative financial instruments of about $18 million, increase in fair value of investment properties of about $85 million and gain on disposal of subsidiaries of about $61 million. None of these items occurred in the current year.

Net profit for the year attributable to the shareholders of PYI was about $346 million (2006: $279 million) and basic earnings per share was 23.6 cents (2006: 20.4 cents). Such improvement was mainly due to deferred tax credit of $63 million arising from a reduction of the PRC enterprise income tax rate from 33% to 25% as promulgated in March 2007.

When compared with the Group’s financial position as at last year end, total assets increased by 27% to about $7,621 million (2006: $5,982 million) and net current assets decreased by 36% to about $824 million (2006: $1,284 million). These changes were mainly attributed to the Group’s further capital injection into developing projects relating to its port and infrastructure development and logistics business, as well as its fund contribution to the acquisition of LPG distribution business which started to operate during the current year. Consequently, current assets decreased from 1.7 times to 1.3 times of current liabilities. After accounting for the net profit of about $346 million net of dividends paid/declared of about $370 million, equity attributable to shareholders of PYI increased by 8% to about $2,772 million (2006: $2,571 million), representing $1.86 per share as at 31 March 2007 (2006: $1.86 per share).

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FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Net cash inflow from operating activities was about $375 million, and net cash outflow in respect of investing and financing activities was about $333 million, resulting in a net increase in available cash and cash equivalents of about $42 million for the year.

Total shareholder return for the year ended 31 March 2007, representing the increase in share price of PYI during the year plus dividends paid during the year, is about 38% (2006: 37%).

REVIEW OF OPERATIONS

Port & Infrastructure Development & Logistics

The Group has developed a clear strategy to become a regional port player in China, focusing on bulk cargo, infrastructure and logistics in the Yangtze River region. Concentrating on this area of rapid growth, the Group expects its investments in ports and related facilities to drive future business development.

Rapid economic growth in China, combined with booming international trade, has resulted in increasing demand for raw materials, fertilizers, construction materials, foodstuffs and fuel. This demand is in turn creating strong growth in the country’s ports and logistics sector, especially in the Yangtze River region.

Development of Yangkou Port, the Group’s flagship deep sea port project located at the mouth of the Yangtze River, continues to progress well. In April 2006, PYI raised its stake in Yangkou Port project to 75%, underscoring its commitment in developing the port into a trans-shipment hub in the Yangtze River region. In May 2006, the Group entered into collaboration with PetroChina for conducting preliminary engineering works for the development of a liquefied natural gas (LNG) receiving facility at the man-made island. In December 2006, PetroChina further entrusted the Group to manage, build and transfer a portion of the island planned for its proposed LNG receiving facility. These milestone developments virtually testified the project’s technical viability.

Nantong Port Group, in which the Group owns a 45% stake following completion of the acquisition, has recorded significant growth. Expansion of the Langshan Terminal effectively increases throughput capacity by an impressive 54% to nearly 50 million tonnes.

In September 2006, the Group completed acquisition of the assets and business of Minsheng Gas, a mature liquefied petroleum gas (LPG) operator located in Wuhan with proven logistics and operational capabilities. With LPG storage facilities, LPG terminal and jetty, the acquisition provided the Group with an initial foothold in the fast growing oil and gas logistics sectors in Central China and facilitated its development of an integrated transshipment network along the Yangtze River. Further details of this acquisition are described in the paragraph headed “Acquisition of assets and business of Minsheng Gas” under the section headed “MATERIAL ACQUISITION AND DISPOSAL”.

The acquisitions of Nantong Port and Minsheng Gas have equipped the Group with professional expertise and on-the-ground operational experience in both dry and liquid bulk cargo operations, which in turn complement its spearheading development in Yangkou Port. The strategic locations of these investments as well as the synergy generated from their operations will form key ingredients for the Group to realize its vision to become a regional port player.

Armed with a continued organic growth strategy supplemented by future strategic acquisitions, the Group is well positioned to benefit from the booming demand for distribution, transportation and logistics services in the Yangtze River region.

Engineering business – Paul Y Engineering

With over 60 years of experience and top quality people, Paul Y Engineering leads the local industry in terms of professionalism and a thorough understanding of its chosen markets. Paul Y Engineering provides integrated solutions to its clients via its three core business, management contracting, project management and facilities management. By participating to develop cities throughout China, it is fully equipped for the provision of property related services to investors from inception, implementation and delivery of property development.

Paul Y Engineering and its subsidiaries (the “Paul Y Engineering Group”) achieved gross profit of $167 million during the year (2006: $230 million). Net profit attributable to shareholders rose by 12% to $113 million (2006: $101 million).

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FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

The management contracting division remains the major contributor of operating profit to the Paul Y Engineering Group. During the year, new construction contracts worth over $5 billion were secured. As at 31 March 2007, the value of contracts on hand was $12,078 million and the value of work remaining was $6,872 million. Since 1 April 2007, Paul Y Engineering has secured additional contracts worth approximately $500 million.

LPG Distribution

The LPG distribution business, acquired by the Group in September 2006, contributed about $3 million (2006: Nil) to operating profit for the year ended 31 March 2007.

Having occupied a market share of about 40% in Wuhan’s LPG market, this newly acquired LPG distribution business provided the Group with not only a new operating skill base but also access to the oil and gas distribution sector in Central China. With a large business stream in converting motor vehicles to LPG users, Minsheng Gas is effectively creating its own market and driving demand, while simultaneously supporting national environmental protection policies that encourage the use of LPG as energy.

Property Development & Investment

Property investment contributed about $14 million (2006: $12 million) to operating profit for the year ended 31 March 2007.

After completion of the disposal of Paul Y. Centre in January 2006, the Group sold another property, M. Bux Tower, an industrial building located in Kwai Chung, Hong Kong at a cash consideration of $98 million in December 2006. The sale price represented a premium of about $20 million over this property’s book value. The disposal of M. Bux Tower marked the completion of the Group’s divestment programme, allowing it to focus its future business on developing its regional port strategy in the Yangtze River Delta.

Treasury Investment

The Treasury investment business contributed about $174 million (2006: $80 million) towards operating profit during the year ended 31 March 2007.

Total value of the Group’s investment securities portfolio amounted to about $156 million as at 31 March 2007 (2006: $162 million), equivalent to about 2% of the Group’s total assets (2006: 3%). Portfolio of highyield loans receivable amounted to about $469 million (2006: $616 million) as at 31 March 2007, equivalent to about 6% (2006: 10%) of the total assets of the Group.

MATERIAL ACQUISITION AND DISPOSAL

Acquisition of 45% equity interest in Nantong Port Group

During the current year, the Group completed its RMB435 million capital contribution in Nantong Port Group for a 45% equity interest. Nantong Port Group is a core port enterprise owning four major terminals at Nantong Port. Being a major port located at the mouth of the Yangtze River, Nantong Port is a category one national port open to foreign trade and a hub port of the China and the second largest bulk cargo distribution centre down-stream of the Yangtze River.

Acquisition of a further 7.4% indirect interest in Yangkou Port project

During the current year, the Group further increased its indirect interest in the Yangkou Port project from 67.6% to 75% by acquiring the remaining 9.9% interest of Global Achiever Limited, an intermediate holding company of the Yangkou Port project subsidiaries, as held by a minority shareholder at a consideration wholly satisfied by the issue of 68.5 million new shares of PYI at a fair price of about $2.913 each.

Acquisition of assets and business of Minsheng Gas

On 12 May 2006, the Group entered into an asset acquisition agreement to acquire assets of a liquid bulk logistics and LPG distribution business in Wuhan at a consideration of RMB470 million, payable as to RMB350 million in cash and RMB120 million by way of the issue of certain 3-year, zero coupon, HK$ denominated convertible notes of PYI at a conversion price of $4.25 per share (the “Convertible Notes”). The acquisition was completed in September 2006.

169

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

Divestment in China Strategic

During the current year, the Group completed disposal of its 15.32% interest in China Strategic Holdings Limited at a cash consideration of $26 million. The remaining 62 million consolidated shares of China Strategic were classified as investment held for trading as at 31 March 2007.

Disposal of M. Bux Tower

As described in the paragraph headed “Property Development & Investment” under the section headed “REVIEW OF OPERATIONS”, in December 2006, the Group sold M. Bux Tower for a cash consideration of $98 million.

MAJOR SUBSEQUENT EVENTS

New syndicated loan

Subsequent to the year end, in July 2007, the Group, through a 75% owned subsidiary Jiangsu YangKou Port Development and Investment Co., Ltd., entered into a 7-year, RMB960 million project loan facility agreement with eight banks led by the Industrial and Commercial Bank of China. This syndicated loan, bearing the current Renminbi long-term loan benchmark interest rate as announced by the People’s Bank of China, will be used to fund construction of the 13-kilometer Yellow Sea Crossing and the 1.4 square kilometers man-made island at Yangkou Port.

Issue of convertible notes

Pursuant to the asset acquisition agreement described in the paragraph headed “Acquisition of assets and business of Minsheng Gas” under the section headed “MATERIAL ACQUISITION AND DISPOSAL”, subsequent to the year end, PYI issued the Convertible Notes. At maturity, the redemption amount payable is 114.167% of par value.

Disposal of 25% interest in Paul Y. Centre

In March 2007, a 25% owned associate of Paul Y Engineering entered into a conditional agreement for the disposal of Paul Y. Centre located at No. 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong at a consideration of $1,150 million. The disposal was completed in June 2007.

OUTLOOK

China’s track record of strong economic growth looks set to remain steady for the coming financial year ending 31 March 2008. This organic growth, coupled with increasing levels of international trade, has spiked demand for essential raw materials, construction materials and energy resources.

PYI’s business in bulk cargo and ports infrastructure is directly benefiting from this booming demand as China increases its appetite for the resources necessary to support its continued growth.

With our strategic position in the Yangtze River Delta, PYI is focusing on the ongoing development of its flagship project at Yangkou Port, as well as leveraging its operations at Nantong Port and Minsheng Gas for maximum synergies, cross-business opportunities and economies of scale.

Having acquired operational expertise in both dry and liquid bulk cargo, PYI is exploring opportunities for further acquisitions that support its key business operations in the Yangtze River Delta.

The Group is fully committed to deploying its professional capabilities and operational resources to transform China’s ports and logistics sector and to achieve our vision of becoming the major bulk cargo port investor and operator in the Yangtze River region.

170

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

LIQUIDITY AND CAPITAL RESOURCES

The Group continues to adopt a prudent funding and treasury policy with regard to its overall business operations. A variety of credit facilities are maintained to meet its working capital requirements and committed capital expenditures. The loans of the Group bear interest at market rates and are with terms of repayment ranging from one year to seven years. In an effort to minimize the adverse impact of exchange rate and interest rate fluctuations on the Group’s earnings, assets and liabilities, the Group continues to manage these fluctuation exposures on specific transactions.

As at 31 March 2007, the Group’s total borrowings amounted to about $1,024 million (2006: $688 million) with $597 million (2006: $523 million) repayable within one year and $427 million (2006: $165 million) repayable after one year. Out of the Group’s total borrowings of about $1,024 million as at 31 March 2007, about $226 million was non-recourse to the Group (excluding the Paul Y Engineering Group).

As at 31 March 2007, $262 million (2006: $404 million) of the Group’s borrowings bore interest at floating rates and were denominated in Hong Kong dollars, $600 million (2006: $142 million) bore interest at floating rates and were denominated in Renminbi, and $162 million (2006: $142 million) bore interest at a fixed rate and were denominated in Renminbi. The Group’s gearing ratio was 0.37 (2006: 0.27), which is calculated based on the total borrowings of $1,024 million (2006: $688 million) and the Group’s shareholders’ fund of $2,772 million (2006: $2,571 million).

Cash balances as at 31 March 2007 amounted to about $779 million (2006: $785 million), of which about $43 million (2006: $119 million) has been pledged to banks to secure general credit facilities granted to the Group. As at the year end, the Group has a net debt position (being cash balances net of bank borrowings) of $185 million (2006: net cash of $313 million).

During the current year, PYI issued and allotted 68,500,000 ordinary shares as consideration for acquiring a further 7.4% indirect interest in the Yangkou Port project.

In addition, the Group contracted to pay for the consideration of acquiring the LPG assets and business in Wuhan, as to RMB350 million in cash and RMB120 million by way of the Convertible Notes, which were issued subsequent to the year end. The Group also obtained a 7-year bank term loan in principal amount of RMB300 million as the primary facility to finance this acquisition. As at 31 March 2007, the Group utilised the said bank term loan in an aggregate amount of RMB262 million.

CONTINGENT LIABILITIES

As at 31 March 2007, the Group has contingent liabilities in respect of guarantee given to a bank for banking facilities to an associate of about $9 million (2006: $9 million), which was non-recourse to the Group (excluding the Paul Y Engineering Group).

PLEDGE OF ASSETS

As at 31 March 2007, certain property, plant and equipment, land and sea use rights and bank deposits of the Group with an aggregate value of about $644 million (2006: $197 million) and benefits under certain construction contracts have been pledged to banks and financial institutions to secure general credit facilities granted to the Group. As at 31 March 2007, about $53 million (2006: $76 million) of these pledged assets used to secure credit facilities which were non-recourse to the Group (excluding the Paul Y Engineering Group).

COMMITMENTS

As at 31 March 2007, the Group had expenditure contracted for but not provided for in the consolidated financial statements in respect of acquisition of certain property, plant and equipment, project under development and properties under development in the amount of about $1,520 million (2006: $92 million).

HUMAN RESOURCES

At the end of the year under review, the Group employed a total of about 1,927 full-time employees (2006: 1,294 employees). Remuneration packages consisted of salary as well as performance-based and equitybased bonuses. PYI has implemented three share-related incentive schemes to provide alternative means to motivate employees and promote their loyalty in line with the Group’s business strategy. Such schemes benefited PYI staff both in Hong Kong and the Mainland.

171

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

Set out below is a summary of the audited consolidated results and financial position of the Group for the three years ended 31 March 2008 as extracted from the annual report of the Company for the year ended 31 March 2008.

RESULTS

Revenue
– Continuing operations
– Discontinued operations
Profit before taxation
Taxation
Profit for the year from discontinued
operations
Profit for the year
Attributable to:
Equity holders of the Company
Minority interests
ASSETS AND LIABILITIES
Total assets
Total liabilities
Shareholders’ funds
Attributable to:
Equity holders of the Company
Convertible notes reserve of a subsidiary
Minority interests

Audited
Year ended 31st March
2008
2007
2006
HK$’000
HK$’000
HK$’000
(Restated)
(Restated)
155,634
244,060
44,238
2,547
5,177
4,234
158,181
249,237
48,472
324,501
899,546
46,436
(10,669)
(8,695)
–
2
29
–
313,834
890,880
46,436
252,051
843,929
50,289
61,783
46,951
(3,853)
313,834
890,880
46,436
Audited
As at 31st March
2008
2007
2006
HK$’000
HK$’000
HK$’000
3,705,532
6,310,209
2,460,700
(309,101)
(1,938,149)
(428,691)
3,396,431
4,372,060
2,032,009
3,396,431
2,810,426
2,009,945
–
55,279
–
–
1,506,355
22,064
3,396,431
4,372,060
2,032,009

172

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP

Set out below is the audited consolidation financial statements of the Group for the financial years ended 31 March 2007 and 31 March 2008 together with the relevant notes to the accounts, which are extracted from the annual report of the Company for the year ended 31 March 2008. The auditors of the Company have not issued any qualified opinion on the Group’s financial statements for the financial years ended 31 March 2007 and 31 March 2008.

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31ST MARCH, 2008

Notes Continuing operations Revenue 6 Management and other related service income Net gain on financial instruments 7 Interest income Property rental income Other income 8 Gain (loss) on changes in fair values of investment properties Administrative expenses Impairment losses 10 Finance costs 11 Discount on acquisitions of a subsidiary 12 Net (loss) gain on deemed disposal and disposal of subsidiaries and associates 13 Share of results of associates – share of results – discount on acquisitions of associates Profit before taxation 14 Taxation 15 Profit for the year from continuing operations Discontinued operation Profit for the year from discontinued operation 16 Profit for the year Attributable to: Equity holders of the Company Minority interests Distributions 17 Earnings per share 18 *From continuing and discontinued operations* Basic Diluted *From continuing operations* Basic Diluted	2008 HK$’000 155,634 5,110 159,441 71,530 1,615 9,831 4,566 (122,868) (20,960) (57,040) – (88,638) 160,939 200,975 324,501 (10,669) 313,832 2 313,834 252,051 61,783 313,834 78,043 HK cents 9.9 9.0 9.9 9.0	2007 HK$’000 (Restated) 244,060 4,372 117,271 92,377 738 27,735 (7,018) (97,155) (10,014) (39,450) 560,055 1,893 207,221 41,521 899,546 (8,695) 890,851 29 890,880 843,929 46,951 890,880 59,191 HK cents 38.0 32.5 38.0 32.5

173

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED BALANCE SHEET

AT 31ST MARCH, 2008

Notes Non-current assets Property, plant and equipment 19 Investment properties 20 Prepaid lease payments 21 Intangible assets 22 Interests in associates 23 Debt portion of convertible notes 24 Conversion options embedded in convertible notes 24 Deposits for acquisition of subsidiaries 25 Deposits for acquisition of long-term investments 26 Payments for acquisition of interest in properties 27 Available-for-sale investments 28 Deferred tax assets 47 Current assets Inventories Prepaid lease payments 21 Other assets 29 Debtors, deposits and prepayments 30 Margin account receivables 31 Deposits for acquisition of investments held for trading 32 Amounts due from associates 33 Amounts due from related companies 34 Loans receivable 35 Financial assets designated at fair value through profit or loss 36 Investments held for trading 37 Tax recoverable Short-term bank deposits, bank balances and cash 38 Non-current assets classified as held for sale 39 Current liabilities Margin account payables 31 Creditors and accrued expenses 40 Amounts due to associates 41 Derivative financial instruments 42 Redeemable convertible preference shares 43 Tax payable Borrowings – due within one year 44 Bank overdrafts 45 Net current assets Total assets less current liabilities	2008 HK$’000 88,621 9,511 85,223 830 2,745,768 180,555 1,923 – – – 117,377 – 3,229,808 33 2,214 – 8,898 2,930 – 261,294 6,753 25,000 5,390 33,433 – 70,297 416,242 59,482 475,724 1,835 20,524 832 – – – 2,450 29,457 55,098 420,626 3,650,434	2007 HK$’000 179,765 150,421 87,437 4,580 1,594,047 274,304 98,466 50,000 145,000 58,830 1,033,823 1,464
		3,678,137
		239 2,214 229,288 404,029 17,523 73,289 500,050 7,262 340,549 147,238 626,649 1,438 282,304
		2,632,072 –
		2,632,072
		6,794 91,884 163,015 222 286,137 63,977 517,100 71,599
		1,200,728
		1,431,344
		5,109,481

174

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Notes Non-current liabilities Borrowings – due after one year 44 Convertible notes payable 46 Deferred tax liabilities 47 Net assets Capital and reserves Share capital 48 Share premium and reserves Equity attributable to equity holders of the Company Convertible notes reserve of a subsidiary Minority interests Total equity	2008 HK$’000 55,200 192,952 5,851 254,003 3,396,431 269,460 3,126,971 3,396,431 – – 3,396,431	2007 HK$’000 141,350 556,980 39,091
		737,421
		4,372,060

		187,298 2,623,128
		2,810,426 55,279 1,506,355
		4,372,060

175

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31ST MARCH, 2008

							Attributable to equity holders of the Company	Attributable to equity holders of the Company	Attributable to equity holders of the Company	Attributable to equity holders of the Company
																Convertible	Share
						Capital		Property	Investment		Convertible	Preference	Share			notes	option
	Share	Share	Contributed	Reserve on		redemption	Other	revaluation	revaluation	Translation	notes	share	option	Accumulated		reserve of	reserve of a	Minority
	capital	premium	surplus	acquisition		reserve	reserve	reserve	reserve	reserve	reserve	reserve	reserve	profits	Total	a subsidiary	subsidiary	interests	Total
	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
			(Note a)		(Note b)		(Note c)
At 1st April, 2006	183,750	282,782	1,108,927		(58,374)	908	3,470	467	15,259	25,691	–	871	–	446,194	2,009,945	–	–	22,064	2,032,009
Exchange differences arising from
translation of foreign operations	–	–	–		–	–	–	–	–	2,165	–	–	–	–	2,165	–	–	(7,190)	(5,025)
Share of post-acquisition reserve
movements of associates	–	–	–		–	–	–	–	(10,306)	26,857	–	–	–	–	16,551	–	–	4,839	21,390
Surplus arising from revaluation of:
– land and buildings	–	–	–		–	–	–	8,943	–	–	–	–	–	–	8,943	–	–	–	8,943
– available-for-sale investments	–	–	–		–	–	–	–	3,449	–	–	–	–	–	3,449	–	–	2,235	5,684
Deferred tax liability arising on
revaluation of land and buildings	–	–	–		–	–	–	(2,746)	–	–	–	–	–	–	(2,746)	–	–	–	(2,746)
Net (expense) income recognised directly in equity	–	–	–		–	–	–	6,197	(6,857)	29,022	–	–	–	–	28,362	–	–	(116)	28,246
Profit for the year	–	–	–		–	–	–	–	–	–	–	–	–	843,929	843,929	–	–	46,951	890,880
Released on deemed disposal and
disposal of associates	–	–	–		4,987	–	(72)	–	(68)	(1,617)	–	–	–	–	3,230	–	–	–	3,230
Released on disposal of available-for-sale investments	–	–	–		–	–	–	–	(8,241)	–	–	–	–	–	(8,241)	–	–	–	(8,241)
Total recognised income and
expenses for the year	–	–	–		4,987	–	(72)	6,197	(15,166)	27,405	–	–	–	843,929	867,280	–	–	46,835	914,115
Issue of shares:
– on conversion of redeemable
convertible preference shares	90	855	–		–	–	–	–	–	–	–	(3)	–	–	942	–	–	–	942
– under scrip dividend scheme	3,458	(3,458)	–		–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
Distributions	–	–	–		–	–	–	–	–	–	–	–	–	(59,191)	(59,191)	–	–	–	(59,191)
Acquisition of interests in subsidiaries	–	–	–		4,215	–	–	–	(1,681)	–	–	–	–	3,143	5,677	55,279	–	1,765,646	1,826,602
Acquisition of additional interests in subsidiaries	–	–	–		–	–	–	–	–	–	–	–	–	–	–	–	–	(325,106)	(325,106)
Credit arising on scrip dividends	–	–	–		–	–	–	–	–	–	–	–	–	17,780	17,780	–	–	–	17,780
Dividend paid to minority shareholders
of a listed subsidiary	–	–	–		–	–	–	–	–	–	–	–	–	–	–	–	–	(4,159)	(4,159)
Share of post-acquisition reserve
movements of associates	–	–	–		(32,134)	–	127	–	–	–	–	–	–	–	(32,007)	–	–	1,075	(30,932)
At 31st March, 2007	187,298	280,179	1,108,927		(81,306)	908	3,525	6,664	(1,588)	53,096	–	868	–	1,251,855	2,810,426	55,279	–	1,506,355	4,372,060
Exchange differences arising from
translation of foreign operations	–	–	–		–	–	–	–	–	8,299	–	–	–	–	8,299	–	–	3,798	12,097
Share of post-acquisition reserve
movements of associates	–	–	–		–	–	–	–	(57,059)	82,757	–	–	–	–	25,698	–	–	5,999	31,697
Surplus arising from revaluation of:
– land and buildings	–	–	–		–	–	–	13,218	–	–	–	–	–	–	13,218	–	–	–	13,218
– available-for-sale investments	–	–	–		–	–	–	–	97,575	–	–	–	–	–	97,575	–	–	41,110	138,685
Deferred tax liability arising
on revaluation of land and buildings	–	–	–		–	–	–	(3,007)	–	–	–	–	–	–	(3,007)	–	–	–	(3,007)
Net income (expense) recognised directly in equity	–	–	–		–	–	–	10,211	40,516	91,056	–	–	–	–	141,783	–	–	50,907	192,690
Profit for the year	–	–	–		–	–	–	–	–	–	–	–	–	252,051	252,051	–	–	61,783	313,834
Impairment loss on available-for-sale investments	–	–	–		–	–	–	–	20,960	–	–	–	–	–	20,960	–	–	–	20,960
Released on loss of control of subsidiaries
as a result of deemed disposal	–	–	–		(106)	–	97	–	(617)	(352)	–	–	–	–	(978)	(55,099)	(69)	(2,120,666)	(2,176,812)
On deemed disposal and
disposal of partial interests in:
– subsidiaries	–	–	–		(2,580)	–	1,144	–	(7,302)	(6,861)	–	–	–	–	(15,599)	–	–	504,524	488,925
– associates	–	–	–		646	–	46	–	(349)	(583)	–	–	–	–	(240)	–	–	–	(240)
Released on disposal of available-for-sale investments	–	–	–		–	–	–	–	(20,183)	–	–	–	–	–	(20,183)	–	–	–	(20,183)
Total recognised income and expenses for the year	–	–	–		(2,040)	–	1,287	10,211	33,025	83,260	–	–	–	252,051	377,794	(55,099)	(69)	(1,503,452)	(1,180,826)
Recognition of equity-settled share-based payments	–	–	–		–	–	–	–	–	–	–	–	18,768	–	18,768	–	69	–	18,837
Recognition of equity component of convertible notes	–	–	–		–	–	–	–	–	–	4,183	–	–	–	4,183	–	–	–	4,183
Issue of shares:
– on placement of shares	30,000	192,000	–		–	–	–	–	–	–	–	–	–	–	222,000	–	–	–	222,000
– on conversion of redeemable
convertible preference shares	102	961	–		–	–	–	–	–	–	–	(4)	–	–	1,059	–	–	–	1,059
– under scrip dividend scheme	8,580	(8,580)	–		–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
– on bonus issue	43,480	(43,480)	–		–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
Transaction costs attributable to issue of shares	–	(6,794)	–		–	–	–	–	–	–	–	–	–	–	(6,794)	–	–	–	(6,794)
Distributions	–	–	–		–	–	–	–	–	–	–	–	–	(78,043)	(78,043)	–	–	–	(78,043)
Released on conversion of convertible
notes of a subsidiary	–	–	–		–	–	–	–	–	–	–	–	–	–	–	(180)	–	4,431	4,251
Redemption of redeemable convertible
preference shares	–	–	–		–	–	–	–	–	–	–	(864)	–	864	–	–	–	–	–
Credit arising on scrip dividends	–	–	–		–	–	–	–	–	–	–	–	–	46,465	46,465	–	–	–	46,465
Share of post-acquisition reserve
movements of associates	–	–	–		(265)	–	(248)	–	–	–	–	–	–	1,086	573	–	–	(7,334)	(6,761)
At 31st March, 2008	269,460	414,286	1,108,927		(83,611)	908	4,564	16,875	31,437	136,356	4,183	–	18,768	1,474,278	3,396,431	–	–	–	3,396,431

176

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes:

(a) The contributed surplus of the Group comprises the difference between the nominal amount of the ordinary share capital issued by the Company in exchange for the nominal amount of the share capital of a subsidiary acquired pursuant to a corporate reorganisation on 24th January, 1992 and the credits arising from the changes in the capital and reserves of the Company in other capital reorganisations and the transfers to the accumulated losses as approved by the board of directors from time to time.
(b) The reserve on acquisition of the Group represents:
(i) the amount of fair value changes shared by the Group in relation to the acquisition of additional interest in a subsidiary of an associate;
(ii) the amount of fair value changes shared by the Group in relation to the acquisition of a subsidiary by an associate; and
(iii) the amount of fair value changes arising from the acquisition of additional interest in a subsidiary by the Group.
(c) Other reserve represents the statutory reserves required by the relevant rules and regulations of The People’s Republic of China (the “PRC”) applicable to the Group’s associates.

177

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31ST MARCH, 2008

OPERATING ACTIVITIES Profit before taxation Adjustments for: Allowance recognised (reversed) for: – amounts due from associates and related companies – debtors, deposits and prepayments – loans receivable Depreciation of property, plant and equipment Release of prepaid lease payments Discount on acquisition of: – interests in subsidiaries – additional interests in subsidiaries Net loss (gain) on deemed disposal and disposal of subsidiaries and associates (Gain) loss on changes in fair values of: – conversion options embedded in convertible notes – derivative financial instruments – financial assets designated at fair value through profit or loss – investments held for trading – investment properties Gain on disposal of: – available-for-sale investments – property, plant and equipment Impairment loss (reversed) recognised on: – intangible assets – available-for-sale investments – goodwill of associates Interest expenses Share-based payment expense Share of results of associates Operating cash flows before movements in working capital Increase in inventories Decrease (increase) in debtors, deposits and prepayments Increase in margin account receivables Decrease in deposits for acquisition of investments held for trading Increase in amounts due from associates (Increase) decrease in amounts due from related companies Decrease in loans receivable Decrease in financial assets designated at fair value through profit or loss (Increase) decrease in investments held for trading Increase (decrease) in margin account payables Increase (decrease) in creditors and accrued expenses Increase in amounts due to associates Decrease in amount due to a related company Decrease in derivative financial instruments Cash generated from operations Dividends received from associates Hong Kong Profits Tax paid NET CASH FROM OPERATING ACTIVITIES	2008 HK$’000 324,503 2,511 (901) – 10,408 2,214 – – 88,660 (64,396) – (11,873) (42,150) (4,566) (20,183) (1,537) (25) 20,960 – 57,040 18,837 (361,914) 17,588 (104) 86,339 (15,103) – (42,365) (1,895) 2,286 20,768 (33,144) 1,176 53,711 5,103 – (222) 94,138 35,263 – 129,401	2007 HK$’000 899,575 2,731 2,301 (6,773) 10,235 2,214 (370,923) (189,132) (1,893) 32,239 222 (12,673) (106,842) 7,018 (8,209) (960) – 4,859 5,155 39,450 – (248,742) 59,852 (70) (85,592) (4,231) (73,289) (292,708) 131,946 316,509 58,206 2,254 (24,678) (46,545) 162,754 (190,969) (460) 12,979 94,963 (17) 107,925

178

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Notes INVESTING ACTIVITIES Acquisition of additional interests in associates Investment in financial assets designated at fair value through profit or loss Deposits (paid) refunded for acquisition of long-term investments Deemed disposal and disposal of subsidiaries, net of cash and cash equivalents disposed 50 Acquisition of convertible notes Additions to available-for-sale investments Additions to property, plant and equipment Acquisition of subsidiaries, net of cash and cash equivalents acquired 51 Acquisition of additional interests in subsidiaries Additions to investment properties Proceeds from disposal of interests in associates Proceeds from disposal of partial interests in subsidiaries Proceeds from disposal of available-for-sale investments Deposits refunded for acquisition of subsidiaries Proceeds from disposal of property, plant and equipment NET CASH USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES Gross proceeds from issue of shares Gross proceeds on issue of convertible notes payable Gross proceeds from issue of shares of a subsidiary New bank borrowings raised Redemption of redeemable convertible preference shares Interest paid Dividends paid Repayments of bank borrowings Payment of transaction costs attributable to issues of shares of the Company and a subsidiary Payment of transaction costs attributable to issue of convertible notes payable Other loans raised Repayments of other loans Dividend paid to minority shareholders of a listed subsidiary Repayment of obligation under a finance lease NET CASH FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS BROUGHT FORWARD EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS CARRIED FORWARD ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Short-term bank deposits, bank balances and cash Bank overdrafts	2008 HK$’000 (351,976) (158,279) (110,000) (82,751) (69,974) (67,998) (21,195) – – – 165,213 131,688 51,118 20,000 1,857 (492,297) 222,000 200,000 147,900 30,000 (280,966) (46,568) (31,578) (33,612) (12,279) (4,579) – – – – 190,318 (172,578) 210,705 2,713 40,840 70,297 (29,457) 40,840	2007 HK$’000 (25,582) – 45,175 – (121,322) (11,823) (7,472) (231,355) (135,974) (10,358) – – 29,968 – 2,560 (466,183) – – – – – (27,501) (41,411) (4,775) – – 500,000 (40,000) (4,159) (111) 382,043 23,785 199,591 (12,671) 210,705 282,304 (71,599) 210,705

179

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31ST MARCH, 2008

1. GENERAL

The Company is an exempted company incorporated in Bermuda with limited liability. Its shares are listed on The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”). The addresses of the registered office and the principal place of business of the Company are disclosed in the corporate information section of the annual report.

The consolidated financial statements are presented in Hong Kong dollars (“HKD”), which is also the functional currency of the Company.

The Company is an investment holding company. The principal activities of the Company’s principal subsidiaries and the Group’s principal associates are set out in notes 60 and 23 respectively.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

In the current year, the Group has applied, for the first time, the following new standard, amendment and interpretations (“new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), which are effective for the Group’s financial year beginning 1st April, 2007.

HKAS 1 (Amendment)	Capital Disclosures
HKFRS 7	Financial Instruments: Disclosures
HK(IFRIC) - Int 8	Scope of HKFRS 2
HK(IFRIC) - Int 9	Reassessment of Embedded Derivatives
HK(IFRIC) - Int 10	Interim Financial Reporting and Impairment
HK(IFRIC) - Int 11	HKFRS 2: Group and Treasury Share Transactions

The Group has applied the disclosure requirements under HKAS 1 (Amendment) and HKFRS 7 retrospectively. Certain information presented in prior year under the requirements of HKAS 32 has been removed and the relevant comparative information based on the requirements of HKAS 1 (Amendment) and HKFRS 7 has been presented for the first time in the current year.

The Group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

HKAS 1 (Revised)	Presentation of Financial Statements1
HKAS 23 (Revised)	Borrowing Costs1
HKAS 27 (Revised)	Consolidated and Separate Financial Statements2
HKAS 32 & 1 (Amendments)	Puttable Financial Instruments and Obligations Arising on Liquidation1
HKFRS 2 (Amendment)	Vesting Conditions and Cancellations1
HKFRS 3 (Revised)	Business Combinations2
HKFRS 8	Operating Segments1
HK(IFRIC) - Int 12	Service Concession Arrangements3
HK(IFRIC) - Int 13	Customer Loyalty Programmes4
HK(IFRIC) - Int 14	HKAS 19 - The Limit on a Defined Benefit Asset,
	Minimum Funding Requirements and their Interaction3

1 Effective for annual periods beginning on or after 1st January, 2009
2 Effective for annual periods beginning on or after 1st July, 2009 3 Effective for annual periods beginning on or after 1st January, 2008 4 Effective for annual periods beginning on or after 1st July, 2008

The adoption of HKFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1st July, 2009. HKAS 27 (Revised) will affect the accounting treatment for changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control, which will be accounted for as equity transactions. The directors of the Company anticipate that the application of other new or revised standards, amendments or interpretations will have no material effect on how the results and the financial position of the Group are prepared and presented.

3. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments, which are measured at revalued amounts or fair values, as explained in the accounting policies set out below.

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange and by the Hong Kong Companies Ordinance.

180

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations

If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Acquisition of additional interests in subsidiaries

On acquisition of additional interest in a subsidiary, the difference between the fair values and the carrying values of the underlying assets and liabilities attributable to the additional interest in a subsidiary acquired is debited to reserve on acquisition. Goodwill or discount arising on the purchase of the additional interest is calculated as the difference between the additional cost of the interest acquired and the increase in the Group’s interest, based on the fair value of all identifiable assets and liabilities of the subsidiary.

Business combinations achieved in stages

For business combination that involves more than one exchange transaction through successive share purchases, the cost of the transaction and fair value information at the date of each exchange transaction are treated separately to determine the amount of any discount on acquisition/goodwill associated with that transaction. Any adjustments to those fair values relating to previously held interests is accounted for as changes in reserve on acquisition.

Deemed disposal and disposal of subsidiaries/associates

On deemed disposal and disposal of a subsidiary/associate, the difference between the carrying values of the underlying assets and liabilities attributable to the interests disposed, or deemed to be disposed, and the consideration paid, if any, is charged or credited to the consolidated income statement as gain/loss on deemed disposal and disposal of interest in a subsidiary/associate.

Property, plant and equipment

Property, plant and equipment, other than land and buildings, are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the consolidated balance sheet at their revalued amount, being the fair value at the date of revaluation less any subsequent accumulated depreciation and any subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date.

Any revaluation increase arising on revaluation of land and buildings is credited to the property revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised as an expense, in which case the increase is credited to the consolidated income statement to the extent of the decrease previously charged. A decrease in net carrying amount arising on revaluation of an asset is dealt with as an expense to the extent that it exceeds the balance, if any, on the property revaluation reserve relating to a previous revaluation of the same asset. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus is transferred to accumulated profits.

No depreciation is provided in respect of freehold land.

181

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Depreciation is provided to write off the cost or fair value of items of property, plant and equipment over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method.

Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation.

On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair values using the fair value model. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use or no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement in the year in which the item is derecognised.

Interests in associates

An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any identified impairment loss. When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill and such goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

Intangible assets

Intangible assets acquired separately and with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of impairment losses on tangible and intangible assets below).

Financial instruments

Financial assets and financial liabilities are recognised on the balance sheet when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into financial assets at fair value through profit or loss (“FVTPL”), loans and receivables and available-for-sale financial assets. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

182

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Effective interest method

Income is recognised on an effective interest basis for debt instruments other than those financial assets at FVTPL, of which interest income is included in net gains or losses.

Financial assets at FVTPL

Financial assets at FVTPL have two subcategories, including financial assets held for trading and those designated at fair value through profit or loss on initial recognition.

A financial asset is classified as held for trading if:

it has been acquired principally for the purpose of selling in the near future;
it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;
the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and HKAS 39 “Financial Instruments: Recognition and Measurement” permits the entire combined contract (asset or liability) to be designated at FVTPL.

At each balance sheet date subsequent to initial recognition, financial assets at FVTPL are measured at fair value, with changes in fair value recognised directly in profit or loss in the period in which they arise. The net gain recognised in profit or loss includes interest but excludes dividend earned on the financial assets.

Loans and receivables

Convertible notes held by the Group are separately presented as a debt portion and conversion option embedded in convertible notes. On initial recognition, the debt portion represents the residual between the fair value of the convertible notes and the fair value of the embedded conversion option. The debt portion is classified as loans and receivables and is subsequently measured at amortised cost according to the effective interest method.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at FVTPL, loans and receivables or held-to-maturity investments.

At each balance sheet date subsequent to initial recognition, available-for-sale financial assets are measured at fair value. Changes in fair value are recognised in equity, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in equity is removed from equity and recognised in profit or loss (see accounting policy on impairment loss on financial assets below).

Impairment of financial assets

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For an available-for-sale equity investment, a significant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty;
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial asset, such as trade debtors and loans receivable, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the credit period of 30 to 90 days and observable changes in national or local economic conditions that correlate with default on receivables.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, amounts due from associates, amounts due from related companies and loans receivable, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a balance aforesaid is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods. Any increase in fair value subsequent to impairment loss is recognised directly in equity. For available-forsale debt investments, impairment losses are subsequently reversed if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

Financial liabilities and equity

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. The Group’s financial liabilities are generally classified into financial liabilities at FVTPL (derivatives) and other financial liabilities.

Effective interest method

Interest expense is recognised on an effective interest basis.

Convertible notes payable and redeemable convertible preference shares

Convertible notes payable and redeemable convertible preference shares issued by group entities that contain both the liability and conversion option components are classified separately into respective items on initial recognition. Conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the respective group entity’s own equity instruments is classified as an equity instrument.

On initial recognition, the fair value of the liability component is determined using the prevailing market interest of similar non-convertible debts. The difference between the gross proceeds of the issue of the convertible notes payable/redeemable convertible preference shares and the fair value assigned to the liability component, representing the conversion option for the holder to convert the notes/preferable shares into equity, is included in equity (convertible notes reserve/preference share reserve).

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In subsequent periods, the liability component of the convertible notes payable and redeemable convertible preference shares is carried at amortised cost using the effective interest method. The equity component, representing the option to convert the liability component into ordinary shares of the respective group entity, will remain in convertible notes reserve/preference share reserve until the embedded option is exercised (in which case the balance stated in convertible notes reserve/preference share reserve will be transferred to share premium). Where the option remains unexercised at the expiry date, the balance stated in convertible notes reserve/preference share reserve will be released to accumulated profits. No gain or loss is recognised in profit or loss upon conversion or expiration of the option.

Transaction costs that relate to the issue of the convertible notes payable/redeemable convertible preference shares are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are charged directly to equity. Transaction costs relating to the liability component are included in the carrying amount of the liability portion and amortised over the period of the convertible notes payable/redeemable convertible preference shares using the effective interest method.

Other financial liabilities

Other financial liabilities (including bank and other borrowings, trade and other creditors, margin account payables, amounts due to associates) are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Derivative financial instruments

Derivatives that do not qualify for hedge accounting are deemed as financial assets held for trading or financial liabilities held for trading. Such derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately.

Embedded derivatives

Derivatives embedded in non-derivative host contracts are separated from the relevant host contracts and deemed as held for trading when the economic characteristics and risks of the embedded derivatives are not closely related to those of the host contracts, and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss.

Derecognition

Inventories

Inventories represent finished goods which are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method.

Impairment (other than goodwill)

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. In addition, intangible assets with indefinite useful lives are tested for impairment annually, and whenever there is an indication that they may be impaired. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Other assets

Other assets represent costs incurred for the exclusive development right to a land development project in the PRC and also the right to obtain the land for the development. The amounts are stated at the lower of cost and net realisable value.

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Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition.

Non-current assets classified as held for sale are measured at the lower of the assets’ previous carrying amount and fair value less costs to sell.

Revenue recognition

Revenue from sales of goods are recognised when the goods are delivered and title has passed.

Service income is recognised when services are rendered.

Sales of securities are recognised on a trade-date basis when contracts are executed.

Dividend income from investments is recognised when the Group’s right to receive payment has been established.

Interest income from a financial asset (excluding financial assets at fair value through profit or loss) is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Rental income under operating leases is recognised on a straight-line basis over the terms of the relevant leases.

Transaction fee income derived from the provision of an internet-based electronic trading system is recognised when a transaction is duly executed on a trade date basis.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Taxation

Taxation represents the sum of the income tax expense currently payable and deferred tax.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax base used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

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Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Retirement benefit costs

Payments to defined contribution retirement benefit plans are charged as an expense when employees have rendered service entitling them to the contributions.

Borrowing costs

All borrowing costs are recognised as and included in finance costs in the consolidated income statement in the period which they are incurred.

Leasing

The Group as lessor

Rental income from operating leases is recognised in the consolidated income statement on a straight-line basis over the terms of the relevant lease.

The Group as lessee

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the terms of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease terms on a straight-line basis.

Leasehold land and building

The land and building elements of a lease of land and building are considered separately for the purpose of lease classification unless the lease payments cannot be allocated reliably between the land and building elements, in which case, the entire lease is classified as a finance lease and accounted for as property, plant and equipment. To the extent the allocation of the lease payments can be made reliably, leasehold interests in land are accounted for as operating leases.

Equity-settled share-based payment transactions

Share options granted to employees

The fair value of services received determined by reference to the fair value of share options granted at the grant date is recognised as an expense in full at the grant date when the share options granted vest immediately, with a corresponding increase in equity (share option reserve).

At the time when the share options are exercised, the amount previously recognised in share option reserve will be transferred to share premium. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share option reserve will be transferred to accumulated profits.

Share options granted to consultants

Share options issued in exchange for goods or services are measured at the fair values of the goods or services received, unless that fair value cannot be reliably measured, in which case the goods or services received are measured by reference to the fair value of the share options granted. The fair values of the goods or services received are recognised as expenses immediately, unless the goods or services qualify for recognition as assets. Corresponding adjustment has been made to equity (share option reserve).

4. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

The capital structure of the Group consists of net debt, which includes the borrowings, bank overdrafts and convertible notes payable disclosed in notes 44, 45 and 46, respectively, net of cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued share capital, reserves and accumulated profits.

The directors of the Company review the capital structure on a regular basis. As part of this review, the directors consider the cost of capital and the risks associated with each class of capital. The Group will balance its overall capital structure through the payment of dividends and new share issues as well as the issue of new debt or the redemption of existing debt.

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5. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

*Financial assets* Fair value through profit or loss (FVTPL) Held for trading Conversion options embedded in convertible notes Designated at FVTPL (see below) Loans and receivables (including cash and cash equivalents) Available-for-sale financial assets *Financial liabilities* Derivative financial instruments Amortised cost	2008 HK$’000 33,433 1,923 5,390 554,190 117,377 – 294,979	2007 HK$’000 626,649 98,466 147,238 1,473,131 1,033,823 222 1,761,370

(b) Financial risk management objectives and policies

The Group’s major financial instruments include trade and other receivables, margin account receivables and payables, loans receivable, short-term deposits, bank balances and cash, amounts due from associates/ related companies, debt portion of convertible notes, conversion options embedded in convertible notes, available-for-sale investments, financial assets designated at fair value through profit or loss, investments held for trading, trade creditors, derivative financial instruments, redeemable convertible preference shares, bank and other borrowings and convertible notes payable. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below.

The management manages and monitors these exposure to ensure appropriate measures are implemented on a timely and effective manner. There has been no significant change to the Group’s exposure to market risks or the manner in which it manages and measures the risk.

Market risks

(i) Currency risk

Certain investments held for trading and other receivables with aggregate carrying value of approximately HK$5,471,000 (2007: HK$67,482,000) are denominated in United States dollars (“USD”). Since HKD is pegged to USD, the Group does not expect any significant movements in USD/HKD exchange rate. Management has closely monitored foreign exchange exposure to mitigate the foreign currency risk.

(ii) Interest rate risk

The Group is exposed to fair value interest rate risk in relation to fixed-rate debt element of convertible notes, fixed-rate convertible notes payable issued by the Group, fixed-rate convertible notes designated at FVTPL, fixed-rate redeemable convertible preference shares and fixed-rate borrowings.

The Group is also exposed to cash flow interest rate risk in relation to margin account receivables, bank deposits, amounts due from associates and related companies, loans receivable borrowings and bank overdrafts which are arranged at floating rates.

Management has employed a treasury team to closely monitor interest rate movement and manage the potential risk. The Group currently does not have an interest rate hedging policy. However, management monitors interest rate change exposure and will consider hedging significant interest rate change exposure should the need arise.

The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note. The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of the best lending rate of HKD quoted by The Hong Kong and Shanghai Banking Corporation Limited (the “Best Lending Rate”) and Hong Kong Interbank Offer Rate (“HIBOR”) arising from the Group’s HKD denominated borrowings and Canadian prime rate arising from the Group’s Canadian denominated borrowing.

Sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to interest rates for the financial instruments at the balance sheet date which carried floating market interest rate. The analysis is prepared assuming the amount of assets and liability outstanding at the balance sheet date was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

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If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group’s profit for the year would increase/decrease by HK$1,262,000 (2007: decrease/increase by HK$1,004,000).

In management’s opinion, the sensitivity analysis is unrepresentative of the interest rate risk as the year end exposure does not reflect the exposure during the year.

(iii)

Price risk

The Group is exposed to equity price risk through the Group’s available-for-sale investments, investments held for trading, conversion options embedded in convertible notes and certain financial assets designated at FVTPL. Management closely monitors the exposure to price risk. The Group’s equity price risk is mainly concentrated on equity instruments quoted on the Hong Kong Stock Exchange.

The conversion options embedded in convertible notes held by the Group is required to be recognised at fair value at each balance sheet date. Changes in fair value are recognised in the consolidated income statement as long as the convertible notes are outstanding. The fair value adjustment will be affected either positively or negatively, amongst others, by the changes in share price of the convertible notes issuer.

Sensitivity analysis

The sensitivity analyses on available-for-sale investments, investments at FVTPL set out as below have been determined based on the exposure to the share price risks of listed securities, at the reporting date.

If the prices of the respective equity instruments had been 5% higher/lower, and all other variables were held constant, the Group’s profit for the year would increase/decrease by HK$1,941,000 (2007: increase/decrease by HK$32,555,000) as a result of the changes in fair value of investments held for trading, derivative financial instruments and certain financial assets designated at FVTPL. The investment valuation reserve would increase/decrease by HK$5,869,000 (2007: increase/ decrease by HK$14,298,000) for the Group as a result of the changes in fair value of available-forsale investments.

The sensitivity analysis on conversion options embedded in convertible notes set out as below have been determined based on the exposure to the change of share price of the convertible notes issuers at the reporting date only.

If the share prices of those convertible notes issuers had been 5% higher/lower and all other variables were held constant, the Group’s profit for the year would increase/decrease by HK$214,000 (2007: HK$9,749,000), as a result of changes in fair value of conversion option embedded in the convertible notes.

In management’s opinion, the sensitivity analyses are unrepresentative of the inherent market risk as the pricing model used in determining the fair value of the conversion option embedded in the convertible notes involves multiple variables and certain variables are interdependent.

Credit risk

The Group’s maximum exposure to credit risk in the event of the counterparties’ failure to discharge their obligations as at 31st March, 2008, in relation to each class of recognised financial assets, are the amounts stated in the consolidated balance sheet; and the amount of contingent liabilities in relation to financial guarantee and financial support given as disclosed in note 54. In order to minimise the credit risk, management of the Group has determined credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade and loan debtor and convertible notes receivable at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The Group has significant concentration of credit risk on loans receivable and amounts due from two related companies and six associates, amounting to approximately HK$25 million, HK$7 million and HK$261 million, respectively. As they have a strong financial position with good payment record in the past, the directors of the Company consider that the Group’s credit risk to these counterparties is minimal. Other than that, the Group has no significant concentration of credit risk.

In addition, the credit risk on corporate guarantee given to a third party/an associate is limited because management will regularly review the financial performance of the third party/associate and reconsider the continuance of the given guarantee regularly.

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FINANCIAL INFORMATION OF THE GROUP

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The credit risk on liquid fund is limited because the counterparties are banks and other financial institutions with high credit ratings.

	2008	2007
	HK$’000	HK$’000
Loans or receivables designated at FVTPL
Carrying amount of loans or receivables designated at FVTPL	5,390	147,238

The fair value attributable to changes in the credit risk is considered not significant as the counterparties are either financial institutions or companies with high credit ratings.

Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. Management monitors the utilisation of borrowings and ensures compliance with loan covenants.

The following table details the Group’s remaining contractual maturity for its financial liabilities. For non-derivative financial liabilities, the table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

For derivative instruments settle on a net basis, undiscounted net cash (inflows) outflows are presented.

Liquidity and interest risk tables

Weighted Less than average 3 months or interest rate on demand % HK$’000 2008 Non-derivative financial liabilities Margin account payables 1.81 1,837 Creditors – 12,253 Amounts due to associates – 832 Bank overdrafts 4.67 29,584 Borrowings – variable-rate 4.09 589 Convertible notes payable 5.00 2,412 47,507 2007 Non-derivative financial liabilities Margin account payables – 6,794 Creditors – 18,395 Amounts due to associates – 163,015 Bank overdrafts 6.27 71,833 Borrowings – variable-rate 5.46 510,734 Convertible notes payable 2.00 – Redeemable convertible preference shares 3.77 2,697 773,468 Derivatives – net settlement Futures – 222	3 months to 1 year HK$’000 – – – – 4,218 7,236 11,454 – – – – 14,629 8,355 294,228 317,212 –	1-5 years HK$’000 – – – – 26,282 202,600 228,882 – – – – 74,410 590,400 – 664,810 –	Total undiscounted 5+ years cash flows HK$’000 HK$’000 – 1,837 – 12,253 – 832 – 29,584 38,513 69,602 – 212,248 38,513 326,356 – 6,794 – 18,395 – 163,015 – 71,833 101,506 701,279 – 598,755 – 296,925 101,506 1,856,996 – 222	Carrying amount HK$’000 1,835 12,253 832 29,457 57,650 192,952
				294,979
				6,794 18,395 163,015 71,599 658,450 556,980 286,137
				1,761,370
				222

(c)

Fair value

The fair value of the Group’s financial assets and financial liabilities are determined as follows:

the fair value of financial assets and financial liabilities (including derivative instruments) with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices and ask prices respectively; and
the fair value of other financial assets and financial liabilities (including derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates from observable current market transactions as input. For an optionbased derivative, the fair value is estimated using option pricing model.

The directors consider that the carrying amounts of the Group’s financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair values.

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6. REVENUE AND SEGMENTAL INFORMATION

Revenue represents the amounts received and receivable from outside customers for the year. An analysis of the Group’s revenue for the year, for both continuing and discontinued operation, is as follows:

Continuing operations Net gain on disposal of investments held for trading Net gains (losses) arising from changes in fair value of: Gold trading contracts Derivative financial instruments Investments held for trading Financial assets designated at FVTPL Interest income Dividend income from listed investments Property rental income Others Discontinued operation Trading of building materials and machinery	2008 HK$’000 21,975 (65) – 42,150 11,873 71,530 1,403 1,615 5,153 155,634 2,547 158,181	2007 HK$’000 12,254 (303) (222) 106,842 12,673 92,377 2,384 738 17,317 244,060 5,177 249,237

In the current year, revenue includes net gain on disposal of investments held for trading and the net gains (losses) arising from changes in fair value of financial instruments (excluding conversion options embedded in convertible notes). In 2007, revenue included gross proceeds from disposal of financial instruments of approximately HK$375,305,000. The Group has revised its presentation of revenue in order to reflect the nature of sales of financial assets in a more appropriate manner and to conform with market practice. Comparative figures have been restated to conform with the current year’s presentation.

Business segments

For management purposes, the Group’s operations are organised into five operating divisions, namely finance, securities investment, other investment, property investment and trading of building materials and machinery. These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

Finance	–	loan financing services
Securities investment	–	trading of securities
Other investment	–	investments in financial instruments except investments held for trading
Property investment	–	leasing of investment properties
Trading of building materials	–	trading of building materials and machinery
and machinery
Unallocated segment	–	leasing of motor vehicles, management services and
		sand mining business

During the year, the Group disposed of its entire interest in a subsidiary engaged in trading of building materials and machinery business (note 16).

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FINANCIAL INFORMATION OF THE GROUP

Business segment information for the year ended 31st March, 2008 is presented below:

		Continuing operations	Continuing operations	Continuing operations		Consolidated HK$’000 720,603
Finance HK$’000 62,871 42,794 20,077 62,871 5,762	Securities investment HK$’000 628,140 65,528 – 65,528 63,278	Other investment HK$’000 38,813 38,070 998 39,068 102,326	Property investment HK$’000 6,810 1,615 5,195 6,810 5,196	Unallocated HK$’000 7,692 7,627 – 7,627 990	Eliminations HK$’000 (26,270) – (26,270) (26,270) –

						158,181 –
						158,181

						177,576 (69,287) (57,040) (88,660) 160,939 200,975
						324,503 (10,669)
						313,834

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FINANCIAL INFORMATION OF THE GROUP

Inter-segment sales are charged at prevailing market rate or, where no market rate was available, at terms determined and agreed by both parties.

Trading of building Securities Other Property materials and Finance investment investment investment machinery Unallocated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 BALANCE SHEET ASSETS Segment assets 296,335 36,343 376,830 9,511 – – Interests in associates Unallocated corporate assets Total assets LIABILITIES Segment liabilities – 1,835 – – – – Unallocated corporate liabilities Total liabilities OTHER INFORMATION Capital additions: – segment portion – – – – 3 – – unallocated corporate portion – – – – – – Depreciation of property, plant and equipment: – segment portion – – – – 2 – – unallocated corporate portion – – – – – – Release of prepaid lease payments – unallocated corporate portion – – – – – – Gain arising from changes in fair value of: – conversion options embedded in convertible notes – – 64,396 – – – – financial assets designated at fair value through profit or loss – – 11,873 – – – – investments held for trading – 42,150 – – – – – investment properties – – – 4,566 – – Gain on disposal of available-for-sale investments – – 20,183 – – – Impairment loss on available-for-sale investments – – 20,960 – – –	Consolidated HK$’000 719,019 2,745,768 240,745
	3,705,532

	1,835 307,266
	309,101

	3 21,192 2 10,406 2,214 64,396 11,873 42,150 4,566 20,183 20,960

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FINANCIAL INFORMATION OF THE GROUP

Business segment information for the year ended 31st March, 2007 is presented below:

		Continuing operations	Continuing operations	Continuing operations		Consolidated HK$’000 493,298
Finance HK$’000 69,020 53,248 15,772 69,020 24,277	Securities investment HK$’000 378,643 122,364 – 122,364 123,724	Other investment HK$’000 60,297 57,014 15,804 72,818 22,146	Property investment HK$’000 5,851 738 5,113 5,851 (8,511)	Unallocated HK$’000 11,048 10,696 49 10,745 3,504	Eliminations HK$’000 (36,738) – (36,738) (36,738) –

						249,237 –
						249,237

						165,558 (37,223) 560,055 (39,450) 1,893 207,221 41,521
						899,575 (8,695)
						890,880

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FINANCIAL INFORMATION OF THE GROUP

Inter-segment sales are charged at prevailing market rate or, where no market rate was available, at terms determined and agreed by both parties.

Trading of building Securities Other Property materials and Finance investment investment investment machinery Unallocated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 BALANCE SHEET ASSETS Segment assets 358,809 717,461 1,837,036 150,421 846 116,725 Interests in associates Unallocated corporate assets Total assets LIABILITIES Segment liabilities – 7,016 10,966 – – 1,543 Unallocated corporate liabilities Total liabilities OTHER INFORMATION Capital additions: – segment portion – – – 143,000 6 – – unallocated corporate portion – – – – – – Depreciation of property, plant and equipment: – segment portion – – – – 3 – – unallocated corporate portion – – – – – – Release of prepaid lease payments – unallocated corporate portion – – – – – – Gain (loss) arising from changes in fair value of: – convertible options embedded in convertible notes – – (32,239) – – – – financial assets designated at fair value through profit or loss – – 12,673 – – – – investments held for trading – 106,842 – – – – – investment properties – – – (7,018) – – Gain on disposal of available-for-sale investments – – 8,209 – – – Impairment loss on available-for-sale investments – – 4,859 – – –	Consolidated HK$’000 3,181,298 1,594,047 1,534,864
	6,310,209

	19,525 1,918,624
	1,938,149

	143,006 129,203 3 10,232 2,214 (32,239) 12,673 106,842 (7,018) 8,209 4,859

Geographical segments

Over 90% of the revenue of the Group was from the customers in Hong Kong, accordingly, no geographical analysis of revenue was presented.

The following is an analysis of the carrying amount of segment assets and capital additions, analysed by the geographical area in which the assets are located:

Hong Kong The PRC Others	Carrying amount of segment assets 2008 2007 HK$’000 HK$’000 659,154 2,756,853 2 346,013 59,863 78,432 719,019 3,181,298	Capital additions 2008 2007 HK$’000 HK$’000 3 143,006 – – – – 3 143,006	Capital additions 2008 2007 HK$’000 HK$’000 3 143,006 – – – – 3 143,006
	2008 HK$’000 659,154 2 59,863 719,019	2008 HK$’000 3 – – 3
			143,006

195

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

7. NET GAIN ON FINANCIAL INSTRUMENTS

Gain on disposal of: – Precious metals – Investments held for trading – Derivative financial instruments – Financial assets designated at FVTPL (Note) – Available-for-sale investments Dividend income on investments held for trading Gain (loss) on changes in fair value of: – Conversion options embedded in convertible notes – Derivative financial instruments – Financial assets designated at FVTPL (Note) – Investments held for trading – Gold trading contract	Continuing operations 2008 2007 HK$’000 HK$’000 65 1,354 21,975 12,254 (1,794) 954 (745) 5,365 20,183 8,209 1,403 2,384 64,396 (32,239) – (222) 11,873 12,673 42,150 106,842 (65) (303) 159,441 117,271		Discontinued operation 2008 2007 HK$’000 HK$’000 – – – – – – – – – – – – – – – – – – – – – – – –		Consolidated 2008 2007 HK$’000 HK$’000 65 1,354 21,975 12,254 (1,794) 954 (745) 5,365 20,183 8,209 1,403 2,384 64,396 (32,239) – (222) 11,873 12,673 42,150 106,842 (65) (303) 159,441 117,271	Consolidated 2008 2007 HK$’000 HK$’000 65 1,354 21,975 12,254 (1,794) 954 (745) 5,365 20,183 8,209 1,403 2,384 64,396 (32,239) – (222) 11,873 12,673 42,150 106,842 (65) (303) 159,441 117,271
			2008 HK$’000 – – – – – – – – – – – –		2008 HK$’000 65 21,975 (1,794) (745) 20,183 1,403 64,396 – 11,873 42,150 (65) 159,441
						117,271

Note:

The amount includes nil (2007: HK$5,365,000) interest earned.

8. OTHER INCOME

Reversal of allowance for bad and doubtful debts Net foreign exchange gain Income from internet trading system Others	Continuing operations 2008 2007 HK$’000 HK$’000 1,982 7,084 2,616 15,630 1,722 4,303 3,511 718 9,831 27,735		Discontinued operation 2008 2007 HK$’000 HK$’000 – – – – – – – – – –		Consolidated 2008 2007 HK$’000 HK$’000 1,982 7,084 2,616 15,630 1,722 4,303 3,511 718 9,831 27,735	Consolidated 2008 2007 HK$’000 HK$’000 1,982 7,084 2,616 15,630 1,722 4,303 3,511 718 9,831 27,735
			2008 HK$’000 – – – – –		2008 HK$’000 1,982 2,616 1,722 3,511 9,831
						27,735

196

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

9. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

The emoluments paid or payable to each of the eight (2007: nine) directors were as follows:

(a) Directors’ emoluments

2008 Chan Kwok Keung, Charles Chau Mei Wah, Rosanna Chan Kwok Chuen, Augustine Chan Fut Yan Cheung Hon Kit Chuck, Winston Calptor Lee Kit Wah Shek Lai Him, Abraham Total 2007 Chan Kwok Keung, Charles Chau Mei Wah, Rosanna Chan Kwok Chuen, Augustine Chan Fut Yan Cheung Hon Kit Chuck, Winston Calptor Lee Kit Wah Shek Lai Him, Abraham Wong Kam Cheong, Stanley Total	Fees HK$’000 10 10 10 10 10 200 200 200 650 10 10 10 10 10 200 200 153 91 694	Retirement Salaries benefit Equity-settled and other scheme Discretionary share-based benefits contributions bonus payments HK$’000 HK$’000 HK$’000 HK$’000 3,000 300 2,500 – 3,000 300 2,250 2,542 1,838 63 1,500 1,134 600 60 – 2,363 – – – 2,363 – – – 236 – – – 236 – – – 236 8,438 723 6,250 9,110 3,000 300 2,000 – 3,000 300 1,500 – 1,838 63 1,000 – 600 60 – – – – – – – – – – – – – – – – – – – – – – 8,438 723 4,500 –	Total HK$’000 5,810 8,102 4,545 3,033 2,373 436 436 436
			25,171

			5,310 4,810 2,911 670 10 200 200 153 91
			14,355

(b) Employees’ emoluments

All of the five highest paid individuals in the Group for the year ended 31st March, 2008 are directors (2007: three directors and two employees). For the year 2007, the emoluments of the remaining two individuals were as follows:

Salaries and other benefits Retirement benefit scheme contributions Discretionary bonus Their emoluments were within the following bands:	2007 HK$’000 1,903 57 800
	2,760

HK$1,000,001 to HK$1,500,000 HK$1,500,001 to HK$2,000,000	2007 Number of employees 1 1
	2

197

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FINANCIAL INFORMATION OF THE GROUP

10. IMPAIRMENT LOSSES

Impairment losses recognised in respect of: Available-for-sale investments Goodwill of associates	Continuing operations 2008 2007 HK$’000 HK$’000 20,960 4,859 – 5,155 20,960 10,014	Discontinued operation 2008 2007 HK$’000 HK$’000 – – – – – –	Consolidated	Consolidated
	2008 HK$’000 20,960 – 20,960	2008 HK$’000 – – –	2008 HK$’000 20,960 – 20,960	2007 HK$’000 4,859 5,155
				10,014

11. FINANCE COSTS

Continuing operations 2008 2007 HK$’000 HK$’000 Interest on: Bank borrowings wholly repayable within five years 1,224 2,929 Bank borrowings not wholly repayable within five years 3,617 3,105 Other borrowings wholly repayable within five years 26,367 8,990 Margin account payables 4,758 1,798 Convertible notes payable wholly repayable within five years 14,584 11,681 Redeemable convertible preference shares wholly repayable within five years 6,490 10,947 57,040 39,450	Discontinued operation 2008 2007 HK$’000 HK$’000 – – – – – – – – – – – – – –	Consolidated	Consolidated
	2008 HK$’000 – – – – – – –	2008 HK$’000 1,224 3,617 26,367 4,758 14,584 6,490 57,040	2007 HK$’000 2,929 3,105 8,990 1,798 11,681 10,947
			39,450

12. DISCOUNT ON ACQUISITIONS OF A SUBSIDIARY

Discount on acquisitions of: Interests in a subsidiary Additional interests in a subsidiary	Continuing operations 2008 2007 HK$’000 HK$’000 – 370,923 – 189,132 – 560,055	Discontinued operation 2008 2007 HK$’000 HK$’000 – – – – – –	Consolidated	Consolidated
	2008 HK$’000 – – –	2008 HK$’000 – – –	2008 HK$’000 – – –	2007 HK$’000 370,923 189,132
				560,055

13. NET (LOSS) GAIN ON DEEMED DISPOSAL AND DISPOSAL OF SUBSIDIARIES AND ASSOCIATES

Loss on deemed disposal of partial interests in a subsidiary Net loss on disposal of partial interests in subsidiaries Gain on deemed disposal of subsidiaries Loss on disposal of a subsidiary Net gain on deemed disposal of partial interests in associates Net gain on disposal of associates	Continuing operations 2008 2007 HK$’000 HK$’000 (160,483) – (56,724) – 276 – – – 51,738 1,893 76,555 – (88,638) 1,893	Discontinued operation 2008 2007 HK$’000 HK$’000 – – – – – – (22) – – – – – (22) –	Consolidated	Consolidated
	2008 HK$’000 (160,483) (56,724) 276 – 51,738 76,555 (88,638)	2008 HK$’000 – – – (22) – – (22)	2008 HK$’000 (160,483) (56,724) 276 (22) 51,738 76,555 (88,660)	2007 HK$’000 – – – – 1,893 –
				1,893

198

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

During the year, significant changes in shareholdings of subsidiaries and associates are as follows:

(a) Disposal and deemed disposal of interests in Hanny Holdings Limited (“Hanny”), a then subsidiary of the Company
In April 2007, Hanny issued 43,500,000 ordinary shares at a price of HK$3.40 each pursuant to a placing and subscription agreement, resulting in the Group’s interest in Hanny being decreased from approximately 67.23% and 57.36%. Loss on deemed disposal of partial interests in Hanny as a subsidiary amounted to approximately HK$160,483,000.
In May 2007, the Group disposed of 21,000,000 ordinary shares of Hanny at a price of HK$5.00 each, resulting in a loss on disposal of partial interests in a subsidiary of approximately HK$80,595,000. Accordingly, the Group’s interest in Hanny was further reduced to approximately 50.27%.
Subsequent to the above disposal, the Group’s interest in Hanny was further reduced to approximately 49.54% due to the conversion of the convertible notes of Hanny by certain noteholders. Hanny then ceased to be a subsidiary and became an associate of the Group on 18th May, 2007. The deemed disposal of Hanny resulted in a gain of approximately HK$265,000 as disclosed in note 50.
The Group’s interest in Hanny at balance sheet date increased to approximately 49.90% as a combined effect of additional interests in Hanny acquired by the Group and dilution of interests in Hanny due to the shares allotment and issurance of scrip dividend by Hanny. The net loss on deemed disposal of partial interests in Hanny as an associate amounted to approximately HK$6,918,000.

(b) Disposal and deemed disposal of interests in Trasy Gold Ex Limited (“Trasy”), a then subsidiary of the Company

In May 2007, the Group disposal of approximately 6.45% equity interests in Trasy. The Group’s interest in Trasy was reduced to approximately 50.00004%. Gain on disposal of interests in Trasy from this transaction amounted to approximately HK$23,871,000.
In June 2007, the Group’s interest in Trasy was further diluted to approximately 49.998% as a result of exercise of share options granted by Trasy and Trasy then ceased to be a subsidiary and became an associate of the Group on 11th June, 2007. Gain on deemed disposal of interests in Trasy as a subsidiary amounted to approximately HK$11,000 (note 50).
After 11th June, 2007, the Group’s interest in Trasy was further reduced due to the dilution effect of placing and subscription for a total of 1,215,000,000 ordinary shares of Trasy, resulting in gains on deemed disposal of partial interests in associate of approximately HK$62,159,000.
In September 2007, the Group donated 10,000,000 shares of Trasy to The Community Chest of Hong Kong, in which the carrying value of such donated shares was approximately HK$688,000, and disposed of the remaining shares of Trasy for considerations of approximately HK$165,343,000. The total net gain on disposal of shares of Trasy amounted to approximately HK$76,555,000.

After the series of transactions mentioned above, the Group did not have any shareholding interests in Trasy at 31st March, 2008.

The net assets of Hanny, Trasy and other disposed subsidiary at the respective dates of disposal were set out in note 50.

During the year ended 31st March, 2007, the net gain was due to the effect of deemed disposal of interest in associates arising from the dilution effect of exercise of share options, issuance of scrip dividend, issuance of new shares and conversion of convertible notes by outsiders.

199

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

14. PROFIT BEFORE TAXATION

Profit before taxation has been arrived at after charging: Staff costs, including directors’ emoluments: Salaries and other benefits Retirement benefit scheme contributions, net of forfeited contributions of approximately HK$37,000 (2007: Nil) Discretionary bonus Equity-settled share-based payments Auditor’s remuneration Cost of inventories recognised as an expense Release of prepaid lease payments Depreciation of property, plant and equipment Minimum lease payments under operating leases in respect of premises Allowance for bad and doubtful debts and after crediting: Gain on disposal of property, plant and equipment Rental income under operating leases in respect of premises, net of negligible outgoings Reversal of impairment loss of intangible assets 15. TAXATION Current tax: Hong Kong Profits Tax Overseas tax Overprovision of overseas tax in previous year Deferred tax_(note 47)_ Taxation attributable to the Company and its subsidiaries	Continuing operations 2008 2007 HK$’000 HK$’000 30,173 35,089 1,263 406 10,638 6,627 12,033 – 54,107 42,122 4,258 7,310 – – 2,214 2,214 10,406 10,232 1,166 1,533 3,592 5,343 1,537 960 1,615 738 25 – Continuing operations 2008 2007 HK$’000 HK$’000 10,726 9,920 – 342 10,726 10,262 – (5) (57) (1,562) 10,669 8,695	Discontinued operation 2008 2007 HK$’000 HK$’000 587 1,092 20 431 – – – – 607 1,523 – 14 1,794 3,374 – – 2 3 85 164 – – – – – – – – Discontinued operation 2008 2007 HK$’000 HK$’000 – – – – – – – – – – – –	Consolidated 2008 2007 HK$’000 HK$’000 30,760 36,181 1,283 837 10,638 6,627 12,033 – 54,714 43,645 4,258 7,324 1,794 3,374 2,214 2,214 10,408 10,235 1,251 1,697 3,592 5,343 1,537 960 1,615 738 25 – Consolidated 2008 2007 HK$’000 HK$’000 10,726 9,920 – 342 10,726 10,262 – (5) (57) (1,562) 10,669 8,695
	2008 HK$’000 10,726 – 10,726 – (57) 10,669	2008 HK$’000 – – – – – –	2008 HK$’000 10,726 – 10,726 – (57) 10,669

Hong Kong Profits Tax was calculated at the rate of 17.5% of the estimated assessable profit for both years.

Overseas taxation is calculated at the rates prevailing in the respective jurisdictions.

200

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The taxation for the year can be reconciled to the profit before taxation per the consolidated income statement as follows:

Profit before taxation Continuing operations Discontinued operation Tax at Hong Kong Profits Tax rate of 17.5% (2007: 17.5%) Tax effect of expenses not deductible for tax purposes Tax effect of income not taxable for tax purposes Tax effect of utilisation of deductible temporary differences previously not recognised Tax effect of tax losses not recognised Tax effect of share of results of associates Effect of different tax rates of subsidiaries operating in other jurisdictions Overprovision of taxation in previous years Taxation for the year	2008 HK$’000 324,501 2 324,503 56,788 57,348 (41,519) (4,290) 5,677 (63,335) – – 10,669	2007 HK$’000 899,546 29
		899,575

		157,426 5,836 (106,590) (5,122) 7,238 (43,530) (6,558) (5)
		8,695

Details of the deferred tax are set out in note 47.

16. DISCONTINUED OPERATION

On 2nd October, 2007, the Group entered into a sale and purchase agreement to dispose of its entire equity interest in a subsidiary, Dreyer and Company Limited (“Dreyer”), which carried out all of the Group’s business of trading of building materials and machinery for a consideration of HK$1. The disposal was completed on 26th October, 2007, on which the control of Dreyer was passed to the acquirer.

The profit for the year from the discontinued operation is analysed as follows:

Profit from trading of building materials and machinery for the period/year Loss on disposal of the business of trading of building materials and machinery_(note 50)_	2008 HK$’000 24 (22) 2	2007 HK$’000 29 –
		29

The results of the operation of trading of building materials and machinery were as follows:

Revenue Cost of sales Gross profit Administrative expenses Profit for the period/year Attributable to: Equity holders of the Company Minority interests	1.4.2007 to 26.10.2007 HK$’000 2,547 (1,794) 753 (729) 24 24 – 24	1.4.2006 to 31.3.2007 HK$’000 5,177 (3,374)
		1,803 (1,774)
		29

		29 –
		29

201

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Please refer to note 50 for the net assets of Dreyer at the date of disposal.

Cash flows from Dreyer: Net cash from operating activities Cash (used in) from investing activities Cash used in financing activities Net cash flows 17. DISTRIBUTIONS Dividends recognised as distributions to equity holders of the Company during the year: Final dividend for 2007 – HK2.0 cents (2007: HK1.7 cents for 2006) per ordinary share Interim dividend for 2008 – HK1.3 cents (2007: HK1.5 cents for 2007) per ordinary share Dividend proposed in respect of current year: Final dividend proposed for 2008: HK0.3 cent (2007: HK2.0 cents for 2007) per ordinary share	1.4.2007 to 26.10.2007 HK$’000 407 (3) (271) 133 2008 HK$’000 43,480 34,563 78,043 8,084	1.4.2006 to 31.3.2007 HK$’000 313 5 –
		318

		2007 HK$’000 31,237 27,954
		59,191

		43,460

Of the dividend paid during the year, approximately HK$46,465,000 (2007: HK$17,780,000) was settled in ordinary shares under the Company’s scrip dividend schemes notified by way of circular by the Company on 16th October, 2007 and 31st January, 2008 in respect of the 2007 final dividend and the 2008 interim dividend.

The amount of the final dividend proposed for the year ended 31st March, 2008, which will be payable in cash, has been calculated by reference to 2,694,605,269 issued ordinary shares as at the date of this report.

On 5th November, 2007, the Company issued bonus shares to the holders of ordinary shares of the Company on the basis of one new ordinary share for every five ordinary shares held on 15th October, 2007.

In addition, the board of directors has also recommended a bonus issue of warrants on the basis of one warrant for every five ordinary shares of the Company held on 20th October, 2008 at an initial subscription price of HK$0.22 per ordinary share (subject to adjustments) with a term of one year.

18. EARNINGS PER SHARE

For continuing and discontinued operations

The calculation of the basic and diluted earnings per share attributable to the equity holders of the Company is based on the following data:

Profit for the year attributable to equity holders of the Company for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: Adjustment of finance costs on convertible notes payable Adjustment of finance costs on redeemable convertible preference shares Adjustment to the share of results of associates and subsidiaries based on dilution of their earnings per share Earnings for the purposes of diluted earnings per share	2008 HK$’000 252,051 5,851 6,490 (7,036) 257,356	2007 HK$’000 843,929 – 10,947 (28,587)
		826,289

202

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Weighted average number of ordinary shares for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: Options Redeemable convertible preference shares Convertible notes payable Weighted average number of ordinary shares for the purposes of diluted earnings per share	Number of shares 2008 2007 2,542,782,838 2,218,705,720 13,737 – 191,768,457 326,156,885 130,974,065 – 2,865,539,097 2,544,862,605	Number of shares 2008 2007 2,542,782,838 2,218,705,720 13,737 – 191,768,457 326,156,885 130,974,065 – 2,865,539,097 2,544,862,605
		2,544,862,605

The weighted average number of ordinary shares for the purpose of basic earnings per share for both years have been adjusted for the bonus issue of shares on 5th November, 2007.

From continuing operations

The calculation of the basic and diluted earnings per share from continuing operations attributable to the equity holders of the Company is based on the following data:

Profit for the year attributable to equity holders of the Company for the purposes of basic earnings per share Less: Profit for the year from discontinued operation Earnings for the purposes of basic earnings per share from continuing operations Effect of dilutive potential ordinary shares: Adjustment of finance costs on convertible notes payable Adjustment of finance costs on redeemable convertible preference shares Adjustment to the share of results of associates and subsidiaries based on dilution of their earnings per share Earnings for the purposes of diluted earnings per share from continuing operations	2008 HK$’000 252,051 (2) 252,049 5,851 6,490 (7,036) 257,354	2007 HK$’000 843,929 (29)
		843,900 – 10,947 (28,587)
		826,260

The denominators used are the same as those detailed above for both basic and diluted earnings per share.

From discontinued operation

Basic and diluted earnings per share for the discontinued operation is negligible for both years, based on the profit for the year from the discontinued operation of HK$2,000 (2007: HK$29,000) and the denominators detailed above for both basic and diluted earnings per share.

203

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

19. PROPERTY, PLANT AND EQUIPMENT

Land and buildings HK$’000 COST OR VALUATION At 1st April, 2006 35,261 Translation adjustments 365 Additions – Acquired on acquisition of subsidiaries – Disposals – Revaluation increase 8,398 At 31st March, 2007 44,024 Translation adjustments 3,757 Additions – Deemed disposal and disposal of subsidiaries – Disposals – Revaluation increase 12,383 At 31st March, 2008 60,164 Comprising: At cost – At valuation – 2008 60,164 60,164 DEPRECIATION At 1st April, 2006 – Translation adjustments – Provided for the year 545 Eliminated on disposals – Reversal on revaluation (545) At 31st March, 2007 – Translation adjustments 1 Provided for the year 834 Eliminated on deemed disposal and disposal of subsidiaries – Eliminated on disposals – Reversal on revaluation (835) At 31st March, 2008 – CARRYING VALUES At 31st March, 2008 60,164 At 31st March, 2007 44,024	Plant, machinery and office equipment HK$’000 3,416 8 300 32 (94) – 3,662 69 330 (425) (370) – 3,266 3,266 – 3,266 1,492 6 677 (94) – 2,081 63 637 (222) (196) – 2,363 903 1,581	Yacht and motor vehicles HK$’000 17,700 (27) 6,022 1,438 (6,541) – 18,592 169 20,329 (3,250) (4,875) – 30,965 30,965 – 30,965 10,010 14 2,717 (5,091) – 7,650 113 3,658 (286) (4,800) – 6,335 24,630 10,942	Furniture and fixtures HK$’000 8,138 20 1,150 1,075 (329) – 10,054 165 536 (2,482) (246) – 8,027 8,027 – 8,027 2,178 19 1,543 (179) – 3,561 155 1,581 (19) (175) – 5,103 2,924 6,493	Sand mining vessel HK$’000 – 2,286 – 119,192 – – 121,478 1,923 – (123,401) – – – – – – – – 4,753 – – 4,753 – 3,698 (8,451) – – – – 116,725	Total HK$’000 64,515 2,652 7,472 121,737 (6,964) 8,398
					197,810 6,083 21,195 (129,558) (5,491) 12,383
					102,422
					42,258 60,164
					102,422
					13,680 39 10,235 (5,364) (545)
					18,045 332 10,408 (8,978) (5,171) (835)
					13,801
					88,621

					179,765

The above items of property, plant and equipment are depreciated on a straight-line basis at the following rates per annum:

Freehold land	Nil
Buildings	2% – 5%
Plant, machinery and office equipment	10% – 331/3%
Yacht and motor vehicles	20% – 331/3%
Furniture and fixtures	10% – 331/3%
Sand mining vessel	10%

At 31st March, 2008, land and buildings of the Group were revalued by Greater China Appraisal Limited and RHL Appraisal Ltd., an independent qualified professional property valuer, using the direct comparison method. Both Greater China Appraisal Limited and RHL Appraisal Ltd. are not connected with the Group. This revaluation gave rise to a surplus on revaluation of approximately HK$13,218,000, which has been credited to the property revaluation reserve of the Group.

204

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The carrying values of land and buildings held by the Group as at the balance sheet date comprised:

Freehold properties in Canada Buildings in Hong Kong	2008 HK$’000 48,164 12,000 60,164	2007 HK$’000 31,624 12,400
		44,024

At 31st March, 2008, the Group’s land and buildings been carried at cost less accumulated depreciation, the carrying value would have been approximately HK$37,458,000 (2007: HK$35,213,000).

20. INVESTMENT PROPERTIES

FAIR VALUE At 1st April, 2006 Translation adjustments Acquired on an acquisition of subsidiaries Additions Net decrease in fair value recognised in the consolidated income statement At 31st March, 2007 Translation adjustments Deemed disposal and disposal of subsidiaries Net increase in fair value recognised in the consolidated income statement At 31st March, 2008	HK$’000 4,016 65 143,000 10,358 (7,018)
	150,421 524 (146,000) 4,566
	9,511

The fair value of the Group’s investment properties at 31st March, 2008 have been arrived at on the basis of a valuation carried out on that date by RHL Appraisal Limited, who is a member of the Hong Kong Institute of Valuers, and has appropriate qualifications and recent experiences in the valuation of similar properties in the relevant locations. The valuation was arrived at using the direct comparison method by reference to market evidence of transaction prices for similar properties.

All of the Group’s property interests held under operating leases to earn rentals or for capital appreciation purposes are measured using the fair value model and are classified and accounted for as investment properties. The investment properties represents freehold properties outside Hong Kong.

21. PREPAID LEASE PAYMENTS

The Group’s prepaid lease payments represent leasehold land held under medium-term lease in Hong Kong and are analysed for reporting purposes as follows:

Non-current assets Current assets	2008 HK$’000 85,223 2,214 87,437	2007 HK$’000 87,437 2,214
		89,651

22. INTANGIBLE ASSETS

Intangible assets represent club memberships in Hong Kong and the PRC with indefinite life. The directors have reviewed the carrying amounts of the intangible assets and considered that, in light of market conditions, no impairment loss has been recognised in the consolidated income statement for both years.

205

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

23. INTERESTS IN ASSOCIATES

Share of net assets of associates: Listed in Hong Kong Listed overseas Unlisted Goodwill_(note (a) below)_ Market value of listed securities: Hong Kong Overseas	2008 HK$’000 2,740,309 4,282 – 1,177 2,745,768 1,166,454 378,927 1,545,381	2007 HK$’000 997,900 271,506 324,641 –
		1,594,047

		1,477,663 362,788
		1,840,451

Notes:

(a) Included in the cost of interests in associates is goodwill with carrying value of HK$1,177,000 (2007: Nil) arising on acquisitions and deemed acquisitions.

Cost At 1st April, 2006 Arising on acquisition or deemed acquisition of interests in associates At 31st March, 2007 Arising on acquisition of interests in associates At 31st March, 2008 Impairment At 1st April, 2006 Recognised for the year At 31st March, 2007 Recognised for the year At 31st March, 2008 Carrying value At 31st March, 2008 At 31st March, 2007	HK$’000 3,265 1,890
	5,155 1,177
	6,332
	– 5,155
	5,155 –
	5,155
	1,177

	–

206

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(b) Particulars of the Group’s principal associates as at 31st March, 2008 and 2007 are as follows:

		Place of	Principal	Percentage of	Percentage of
	Place of	incorporation/	place of	issued share capital
Name of associate	listing	registration	operation	held by the Group		Principal activities
				2008	2007
				%	%
Burcon NutraScience	Canada	Canada	Canada	24.89	25.46	Investment holding in company engaged
Corporation	and					in the development of commercial
	Germany					canola protein
Central Town Limited	N/A	Hong Kong	Hong Kong	50.00	50.00	Property investment
(note (i))
PYI Corporation Limited	Hong Kong	Bermuda	Hong Kong	26.84	26.97	Investment holding in companies engaged
(“PYI”)						in development and investment in port,
						and infrastructure project, property
						development and investment, treasury
						investment, engineering and property
						related services
Hanny	Hong Kong	Bermuda	Hong Kong	49.90	N/A	Trading of securities, industrial water supply
					(note (ii))	business, holding of vessels for sand
						mining and other strategic investments
Wing On Travel (Holdings)	Hong Kong	Bermuda	Hong Kong	14.22	22.23	Investment holding with subsidiaries
Limited (“Wing On Travel”)				(note (iv))		principally engaged in the business of
(note (iii))						providing package tours, travel and other
						related services, hotel operation in
						Hong Kong and trading of securities
ITC Properties Group	Hong Kong	Bermuda	Hong Kong	6.53	–	Business of property development and
Limited (“ITC Properties”)				(note (iv))		investment in Macau, the PRC and
						Hong Kong, golf resort and leisure
						operations in the PRC, securities
						investment and loan financing services
PSC Corporation Ltd	Singapore	Singapore	Singapore	N/A	26.30	Supply of household consumer products
				(note (v))
Hangzhou Zhongce Rubber	N/A	PRC	PRC	N/A	26.00	Manufacturing of tires
Company Limited				(note (v))

All of the above associates are held by the Company indirectly.

Notes:

(i) As disclosed in note 39, it was disposed of by the Group on 1st April, 2008 and classified as noncurrent assets held for sale in the consolidated balance sheet.
(ii) As disclosed in note 13, Hanny ceased to be a subsidiary of the Company on 18th May, 2007.
(iii) Wing On Travel is a company listed on the Hong Kong Stock Exchange and its financial year end is 31st December. As only published financial information of Wing On Travel are available to the Group, the Group has used the financial statements of Wing On Travel for the financial year ended 31st December, 2007 in applying the equity method of accounting in respect of the interests in the equity shares of Wing On Travel held by the Group. Hence, the Group’s share of net assets and interests of Wing On Travel as 31st March, 2008 is calculated based on the net assets of Wing On Travel as at 31st December, 2007 and the results up to 31st December, 2007, respectively.
(iv) In the opinion of the directors, the Group has representation on the board of directors of these associates, and is able to exercise significant influence over the financing and operating policies of these associates.
(v) As Hanny ceased to be a subsidiary of the Company on 18th May, 2007, these companies ceased to be associates of the Group.

207

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Total assets Total liabilities Net assets The Group’s share of net assets of associates Revenue Profit for the year The Group’s share of results of associates for the year	2008 HK$’000 24,019,426 (11,624,124) 12,395,302 2,744,591 5,689,205 551,619 160,939	2007 HK$’000 18,638,321 (11,429,865)
		7,208,456

		1,594,047

		9,827,896 819,856

		207,221

The Group’s share of results of associates for the year

24. DEBT PORTION OF CONVERTIBLE NOTES AND CONVERSION OPTIONS EMBEDDED IN CONVERTIBLE NOTES

Debtportion 2008 2007 HK$’000 HK$’000 154,821 – 25,734 23,848 – 250,456 180,555 274,304	Embedded conversion option	Embedded conversion option
2008 HK$’000 154,821 25,734 – 180,555	2008 HK$’000 489 1,434 – 1,923 – 1,923	2007 HK$’000 – 1,754 44,642
		46,396 52,070
		98,466

Notes:

(a) The 2% convertible notes were issued by Hanny (“Hanny Notes”) with principal amounts of HK$19,500, HK$94,801,560 and HK$95,138,660 and with maturity on 12th, 15th and 22nd June, 2011, respectively, entitling the noteholders to convert into shares in Hanny at an initial conversion price of HK$9 per share (subject to adjustments), which was subsequently adjusted to HK$0.67 as a result of issuance of bonus shares by Hanny on 6th June, 2007 and 24th September, 2007. On maturity, unless previously converted, Hanny shall redeem the Hanny Notes at the principal amount of the Hanny Notes plus the outstanding interest.
(b) The 1% convertible notes were issued by ITC Properties (the “ITC Properties Notes”) with a principal amount of HK$30,000,000 entitling the holders of the ITC Properties Notes to convert into shares in ITC Properties at an initial conversion price of HK$0.7 per share. Unless previously converted, ITC Properties shall redeem the ITC Properties Notes at the redemption amount which is 110% of their principal amount plus the outstanding interest on 14th June, 2011.
(c) The 2% convertible notes held by Hanny as at 31st March, 2007 were issued by Wing On Travel (“Wing On Travel Notes”) with an aggregate principal amount of HK$300,000,000 entitling the holders of the Wing On Travel Notes to convert into shares in Wing On Travel at an initial conversion price of HK$0.79 per share (subject to adjustments). Unless previously converted or lapsed by Wing On Travel, Wing On Travel shall redeem the Wing On Travel Notes on 7th June, 2011 at 110% of their principal amount. The Wing On Travel Notes was disposed of as a result of deemed disposal of interests in Hanny.

208

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The Group classified the debt portion of the convertible notes as loans and receivables and the embedded conversion option is deemed as held for trading and recognised at fair value on initial recognition. The fair values of the conversion options embedded in on initial recognition are determined by the directors of the Company with reference to the valuation performed by Greater China Appraisal Limited, a firm of independent professional valuers not connected with the Group using Black-Scholes Option Pricing Model. Details of the method and assumptions used in the Black Scholes Option Pricing Model in the valuation of the conversion options embedded in convertible notes as at are as follows:

31st March, 2007 31st March, 2008

Hanny Notes

Stock price	N/A	HK$0.129
Conversion price	N/A	HK$0.67
Volatility	N/A	55.19%
Dividend yield	N/A	10.30%
Option life	N/A	3.2 years
Risk free rate	N/A	1.53%
ITC Properties Notes
Stock price	HK$0.41	HK$0.238
Conversion price	HK$0.70	HK$0.70
Volatility	49.20%	84.73%
Dividend yield	Zero	Zero
Option life	3.37 years	2.56 years
Risk free rate	3.93%	1.39%
Wing On Travel Notes
Stock price	HK$0.60	N/A
Conversion price	HK$0.79	N/A
Volatility	89.00%	N/A
Dividend yield	Zero	N/A
Option life	3.35 years	N/A
Risk free rate	3.96%	N/A

25. DEPOSITS FOR ACQUISITION OF SUBSIDIARIES

The deposits as at 31st March, 2007 were paid by a subsidiary of Hanny pursuant to a conditional agreement for the acquisition of 100% equity interest in Goal Wisdom Limited at a consideration of HK$50,000,000. Goal Wisdom Limited is an investment holding company with its subsidiary engaged in food and beverage operations and related management. During the year, the acquisition was cancelled as certain conditions, including the transfer of land use right of a piece of land located in the PRC to the subsidiary of Goal Wisdom Limited, could not be fulfilled and the amount of HK$20,000,000 was refunded to the Group.

26. DEPOSITS FOR ACQUISITION OF LONG-TERM INVESTMENTS

The deposits as at 31st March, 2007 were paid by certain subsidiaries of Hanny for the acquisition of equity interest in an unlisted investment established, and principally engaged in port business in the PRC and as tender deposits pursuant to certain conditional agreements for the acquisition of certain interests in water supply business, sand dredging business and the exploitation right for river sand business.

27. PAYMENTS FOR ACQUISITION OF INTEREST IN PROPERTIES

The amount as at 31st March, 2007 represented an initial amount of RMB58,000,000 (equivalent to HK$58,830,000) paid by certain subsidiaries of Hanny pursuant to a conditional agreement for the acquisition of interest in certain properties in Shanghai for an aggregate consideration of RMB450,000,000 (equivalent to HK$424,528,000).

209

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

28. AVAILABLE-FOR-SALE INVESTMENTS

At fair value: Listed investments: – Equity securities listed in Hong Kong – Equity securities listed elsewhere Unlisted equity securities_(note (a) below) Unlisted debt securities(note (b) below) At cost less impairment: Unlisted equity securities,(note (c) below)_	2008 HK$’000 75,579 18,316 23,482 – 117,377 – 117,377	2007 HK$’000 257,552 28,315 – 704,067
		989,934 43,889
		1,033,823

During the year, an impairment loss of HK$20,960,000 (2007: HK$4,859,000) in respect of equity securities listed in Hong Kong has been recognised in the consolidated income statement.

Notes:

(a) The amount represents investment in Shikumen Offshore Feeder Fund, which is managed by Shikumen Capital Management Limited. The fair value of the investment is determined by reference to the valuation provided by the counterparty financial institution, which is determined based on inputs such as share price of equity securities of the fund.
(b) At 31st March, 2007, the debt securities which were held by Hanny include the debt portion of five convertible notes designated as available-for-sale-investment are with the following terms:

					Effective
					interest
					rate at
	Principal		Coupon		31st March,
Issuer (convertible notes)	amount	Maturity date	rate	Redemption amount	2007
	HK$’000		%		%
ITC Properties	330,000	10th August, 2010	–	110% of the principal	8.33
(ITC Properties Note 2010)				amount
ITC Properties	270,000	14th June, 2011	1.00	110% of the principal	8.63
(ITC Properties Note 2011)				amount
See Corporation Limited	170,000	9th August, 2010	–	110% of the principal	10.00
(“See Corp”)				amount
(See Corp Note 2010)
Wo Kee Hong (Holdings)	30,000	5th September, 2008	7.25	100% of the principal	10.00
Limited (“Wo Kee Hong”)				amount
(Wo Kee Hong Note)
Asia Standard International	19,000	14th May, 2009	4.00	100% of the principal	9.25
Limited (Asia Standard Note)				amount

All these companies are public limited companies with their shares listed on the Hong Kong Stock Exchange.

The fair value of debt element was calculated based on the present value of contractually determined stream of future cash flows discounted at the required yield ranging from 8.3% to 10% at 31st March. 2007, which was determined with reference to the credit rating of the convertible notes issuer and remaining time to maturity.

The fair values of the corresponding conversion option element as at 31st March, 2007 were approximately HK$52,070,000 (note 24).

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FINANCIAL INFORMATION OF THE GROUP

(c) Black-Scholes Option Pricing Model is used for valuation for conversion option element of convertible notes. The inputs into the model of each convertible note as at 31st March, 2007 were as follows:

ITC Properties Note 2010

Stock price	HK$0.41
Conversion price	HK$0.44
Volatility	49.28%
Dividend yield	Zero
Option life	1.68 years
Risk free rate	3.79%
ITC Properties Note 2011
Stock price	HK$0.41
Conversion price	HK$0.70
Volatility	49.20%
Dividend yield	Zero
Option life	3.37 years
Risk free rate	3.93%
See Corp Note 2010
Stock price	HKS$0.69
Conversion price	HKS4.06
Volatility	66.83%
Dividend yield	Zero
Option life	3.36 years
Risk free rate	3.93%
Wo Kee Hong Note
Stock price	HK$0.47
Conversion price	HK$1
Volatility	72.15%
Dividend yield	Zero
Option life	1.44 years
Risk free rate	3.79%
Asia Standard Note
Stock price	HK$0.25
Conversion price	HK$0.28
Volatility	41.62%
Dividend yield	1.99%
Option life	1.06 years
Risk free rate	3.76%

29. OTHER ASSETS

The other assets as at 31st March, 2007 represented payments made by certain subsidiaries of Hanny to the PRC government for the rights to obtain the land and the exclusive development right pertaining to the land development project of 珠海市龍山智業產業園 located in Long Shan Development Area, Doumen District, Zhuhai City. The subsidiaries of Hanny were also entitled to sell the rights to other investors at a consideration to be agreed among themselves.

30. DEBTORS, DEPOSITS AND PREPAYMENTS

Trade debtors Less: Allowance for doubtful debts Other debtors, deposits and prepayments Less: Allowance for doubtful debts	2008 HK$’000 7,346 – 7,346 2,487 (935) 1,552 8,898	2007 HK$’000 16,115 (2,223)
		13,892
		391,419 (1,282)
		390,137
		404,029

211

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Included in other debtors as at 31st March, 2007 was consideration receivables in connection with the disposal of the business of trading of computer related products under the trade name of “Memorex[®] ” by Hanny on 19th January, 2006 of US$33,000,000 (equivalent to HK$256,047,000) held under an escrow account.

Trade debtors arise from property investment business are payable monthly in advance and the credit terms granted by the Group to other trade debtors normally range from 30 days to 90 days (2007: 30 days to 90 days).

The following is an aged analysis of trade debtors at the reporting date:

Trade debtors 0 - 30 days 31 - 60 days 61 - 90 days Over 90 days	2008 HK$’000 7,338 3 3 2 7,346	2007 HK$’000 7,018 28 1 6,845
		13,892

Before accepting any new customer, the Group will assess the potential customer’s credit quality and defines credit limits by customer. Limits attributed to customers are reviewed twice a year. Over 90% of the trade receivables are neither past due nor impaired and have the best credit rating.

Included in the Group’s trade debtors balance are debtors with aggregate carrying amount of HK$2,000 (2007: HK$6,845,000) which are past due at the reporting date for which the Group has not provided for impairment loss. The Group does not hold any collateral over these balances. The average age of these receivables is between 90 to 120 days (2007: between 90 to 240 days).

The Group has provided fully for all receivables over 365 days because historical experience is such that receivables that are past due beyond 365 days are generally not recoverable.

Movement in the allowance for doubtful debts are as follows:

Balance at beginning of the year Impairment loss recognised on receivables Impairment losses reversed On deemed disposal and disposal of subsidiaries Balance at end of the year	2008 HK$’000 2,223 884 (1,438) (1,669) –	2007 HK$’000 – 2,223 – –
		2,223

Included in the allowance for doubtful debts at 31st March, 2007 were individually impaired trade debtors with an aggregate balance of HK$2,223,000 which had been in severe financial difficulties. The Group did not hold any collateral over these balances.

Movement in the allowance for other debtors are as follows:

Balance at beginning of the year Impairment loss recognised Impairment losses reversed Balance at end of the year	2008 HK$’000 1,282 197 (544) 935	2007 HK$’000 1,204 389 (311)
		1,282

Included in the allowance for doubtful debts were individually impaired trade debtors with an aggregate balance of HK$935,000 (2007: HK$1,282,000) which had been in severe financial difficulties. The Group did not hold any collateral over these balances.

31. MARGIN ACCOUNT RECEIVABLES/PAYABLES

The margin account receivables/payables carry floating interest rates ranging from 1.17% to 5.63% (2007: 0.5% to 5.138%) per annum.

32. DEPOSITS FOR ACQUISITION OF INVESTMENTS HELD FOR TRADING

The deposits as at 31st March, 2007 were paid by Hanny for the acquisition of equity securities listed on the OverThe-Counter Bulletin Board of United States of America.

212

FINANCIAL INFORMATION OF THE GROUP

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33. AMOUNTS DUE FROM ASSOCIATES

The amounts are unsecured, repayable on demand and non-interest bearing, except for an amount of approximately HK$238,430,000 (2007: HK$88,000,000) which bears interest at the Best Lending Rate plus 2% per annum which range from 7.25% to 9.75% (2007: 9.75% to 10%) per annum.

Before approving any new loan to associate, the Group will assess the potential borrower’s credit quality and defines credit limits individually. The directors will continuously assess the recoverability of amounts due from associates. All amounts due from associates are neither past due nor impaired and have the best credit rating.

The Group has provided fully for an amount of approximately HK$2,578,000 (2007: HK$2,456,000). Movement of the allowance is as follows:

Balance at beginning of the year Impairment losses recognised Balance at end of the year	2008 HK$’000 2,456 122 2,578	2007 HK$’000 2,255 201
		2,456

Included in the allowance for doubtful debts were individually impaired amounts due from associates with an aggregate balance of HK$2,578,000 (2007: HK$2,456,000) which had been in severe financial difficulties. The Group did not hold any collateral over these balances.

34. AMOUNTS DUE FROM RELATED COMPANIES

ITC Properties See Corp	2008 HK$’000 – 6,753 6,753	2007 HK$’000 1,055 6,207
		7,262

A director of the Company has significant influence over the above companies. See Corp is an investee of the Group.

The amounts are unsecured, aged within one year, repayable within one year and non-interest bearing, except for an amount of approximately HK$5,742,000 (2007: HK$5,742,000) which bears floating interest at 7.25% to 9.75% (2007: 9.75% to 10%) per annum.

Before approving any new loan to related company, the Group will assess the potential borrower’s credit quality and defines credit limits individually. The directors will continuously assess the recoverability of amounts due from related companies. All amounts due from related companies are neither past due nor impaired and have the best credit rating.

The Group has provided fully for amounts of approximately HK$26,683,000 (2007: HK$24,294,000). The movement of the allowance is as follows:

Balance at beginning of the year Impairment losses recognised Balance at end of the year	2008 HK$’000 24,294 2,389 26,683	2007 HK$’000 21,764 2,530
		24,294

Included in the allowance for doubtful debts were individually impaired amounts due from related companies with an aggregate balance of HK$26,683,000 (2007: HK$24,294,000) which had been in severe financial difficulties. The Group did not hold any collateral over these balances.

213

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

35. LOANS RECEIVABLE

Secured_(note (a) below) Unsecured(note (b) below)_ Less: Impairment loss recognised Movement in the allowance for loans receivable is as follows: Balance at beginning of the year Impairment losses reversed Balance at end of the year	2008 HK$’000 – 26,898 26,898 (1,898) 25,000 2008 HK$’000 1,898 – 1,898	2007 HK$’000 308,549 33,898
		342,447 (1,898)
		340,549

		2007 HK$’000 8,671 (6,773)
		1,898

Before approving any loan to new borrower, the Group will assess the potential borrower’s credit quality and defines credit limits individually. The directors will continuously assess the recoverability of loans receivable. All loans receivable are neither past due nor impaired and have the best credit rating.

Included in the allowance for doubtful debts were individually impaired loans receivable with an aggregate balance of HK$1,898,000 (2007: HK$1,898,000) which had been in severe financial difficulties. The Group did not hold any collateral over these balances.

Notes:

(a) The amount as at 31st March, 2007 were lent by Hanny and secured by the (i) shares in land/property holding companies; (ii) equity interest in certain subsidiaries engaged in garment manufacturing and (iii) investment in listed securities.

The loans receivables carried interest at the Best Lending Rate plus 2% to 3% per annum which ranged from 9.75% to 11% per annum and repayable within one year.

(b) The amounts are unsecured, carry interest at the Best Lending Rate plus 3% per annum (2007: the Best Lending Rate plus 2% to 3% per annum) which ranged from 7.25% to 10.75% (2007: 9.75% to 11%) per annum and repayable within one year from the balance sheet date.

36. FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT AND LOSS

Equity linked notes_(note (a) below) Convertible notes(note (b) below) _Notes:	2008 HK$’000 5,390 – 5,390	2007 HK$’000 24,689 122,549
		147,238

(a) The equity linked notes represent notes with interest payments based on the annual return of a portfolio of underlying asset-backed securities which have an early redemption option. Each equity linked note held by the Group contains one or more embedded derivatives. Hence, the Group designated the entire equity linked notes as financial assets at fair value through profit or loss.

The fair value of equity linked notes are determined by reference to the valuation provided by the counterparty financial institution, which is determined based on inputs such as volatility of relevant share price/index linked by the notes.

(b) The amount as at 31st March, 2007 represented two convertible notes with principal amount of HK$50,000,000 from Mei Ah Enterprises Group Limited (“Mei Ah CN”) and HK$50,000,000 from Golden Harvest Entertainment (Holdings) Limited (“Golden Harvest CN”) held by Hanny. The Group designated these investments as financial assets at fair value through profit or loss.

214

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Details of the assumptions used in the Black-Scholes Option Pricing Model in determining the fair value of the conversion option embedded in the convertible notes designed at fair value through profit or losses at 31st March, 2007 are as follows:

Mei Ah CN

Stock price	HK$0.35
Conversion price	HK$0.44
Volatility	64.58%
Dividend yield	0.37%
Option life	1.18 years
Risk free rate	3.76%
Golden Harvest CN
Stock price	HK$3.2
Conversion price	HK$2.2
Volatility	61.3%
Dividend yield	Zero
Option life	1.39 years
Risk free rate	3.79%

The fair value of debt element was calculated based on the present value of contractually determined stream of future cash flows discounted at the required yield of 9.75% at 31st March, 2007, which was determined with reference to the credit rating of the convertible notes issuer and remaining time to maturity.

37. INVESTMENTS HELD FOR TRADING

Listed equity securities, at fair value: – in Hong Kong – elsewhere	2008 HK$’000 32,138 1,295 33,433	2007 HK$’000 594,645 32,004
		626,649

38. SHORT-TERM BANK DEPOSITS AND BANK BALANCES

The short-term bank deposits and bank balances carry interest at prevailing market interest rates ranging from 0.7% to 6.05% (2007: 2.75% to 5.1%) per annum.

39. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE

On 1st April, 2008, the Group entered into a sale and purchase agreement (the “Central Town Agreement”) in relation to the sale of the Group’s entire 50% equity interest in an associate, Central Town Limited (“Central Town”) with the shareholder’s loan of HK$30,313,000, to a third party for a consideration of HK$145,000,000. The transaction was completed and the voting power was passed to the acquirer on the same date as the Central Town Agreement.

As negotiations for the disposal of Central Town have taken place during the year, the Group’s interest in Central Town, including the amount due from it, amounting to HK$59,482,000 as at 31st March 2008 has been classified as non-current assets held for sale and are presented separately on the balance sheet.

40. CREDITORS AND ACCRUED EXPENSES

Included in creditors and accrued expenses are trade creditors of approximately HK$4,299,000 (2007: HK$18,396,000) and their aged analysis at the balance sheet date is as follows:

Trade creditors 0 - 30 days 31 - 60 days Over 90 days	2008 HK$’000 138 4,161 – 4,299	2007 HK$’000 18,320 47 29
		18,396

41. AMOUNTS DUE TO ASSOCIATES

The amounts are unsecured, non-interest bearing and repayable on demand.

215

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

42. DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS
	2008	2007
	HK$’000	HK$’000
Derivative financial liabilities - Futures	–	222

The futures as at 31st March, 2007 represented the Group’s investment in an overseas stock market index and matured on 7th June, 2007.

43. REDEEMABLE CONVERTIBLE PREFERENCE SHARES

The movement of the liability component of the redeemable convertible preference shares for the current and prior years is set out below:

At 1st April, 2006 shown under non-current liabilities Finance cost Interest paid in the form of a dividend Conversion on 6th December, 2006 At 31st March, 2007 shown under current liabilities Finance cost Interest paid in the form of a dividend Conversion on 7th August, 2007 Redemption on 5th November, 2007 At 31st March, 2008 Number of redeemable convertible preference shares issued and fully paid is as follows: At 1st April, 2006 Conversion on 6th December, 2006 At 31st March, 2007 Conversion on 7th August, 2007 Redemption on 5th November, 2007 At 31st March, 2008	HK$’000 286,811 10,947 (10,679) (942)
	286,137 6,491 (10,602) (1,060) (280,966)
	–

	Number of shares 266,952,000 (890,000)
	266,062,000 (1,000,000) (265,062,000)
	–

The redeemable convertible preference shares with a redemption value of HK$1.06 per preference share were listed on the Hong Kong Stock Exchange and fully redeemed on 5th November, 2007. The redeemable convertible preference shares ranked in priority to the ordinary shares in the Company as to dividends and return of capital and were convertible into ordinary shares of the Company at the option of the holders at any time in accordance with the rights and restrictions as set out in the special resolution of the Company passed on 13th October, 2004 for the redeemable convertible preference shares.

The redeemable convertible preference shares contained two components: liability and equity elements. The equity element was presented in equity heading “preference share reserve”. The effective interest rate of the liability component was 3.88% per annum. The fair value of the embedded derivative of the redeemable convertible was considered to be negligible.

907,115 and 1,019,230 ordinary shares of HK$0.10 each of the Company were issued upon conversion of 890,000 and 1,000,000 redeemable convertible preference shares of HK$0.10 each at the conversion price of HK$1.04 per share on 6th December, 2006 and 7th August, 2007, respectively. The ordinary shares issued by the Company ranked pari passu with the then existing ordinary shares of the Company in all respects.

216

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

44. BORROWINGS

BORROWINGS
	2008	2007
	HK$’000	HK$’000
The entire borrowings is secured and comprise:
Bank loans	57,650	148,450
Other loans	–	510,000
	57,650	658,450

The borrowings are repayable as follows:
Within one year or on demand	2,450	517,100
From one to two years	2,450	9,890
From two to three years	5,250	9,890
From three to four years	5,250	9,890
From four to five years	5,250	12,690
More than five years	37,000	98,990
	57,650	658,450
Less: Amount due within one year or on demand shown
under current liabilities	(2,450)	(517,100)
Amount due after one year	55,200	141,350

The exposure of the Group’s fixed-rate borrowings and the contractual maturity dates are as follows:
	2008	2007
	HK$’000	HK$’000
Fixed-rate borrowings due within one year carrying interest
at 15% per annum	–	510,000

The Group has variable-rate borrowings which carry interest at HIBOR or Canadian prime rate plus a fixed percentage.

The ranges of effective interest rates (which are also equal to contracted interest rates) on the Group’s variable rate borrowings are 2.09% to 5.16% (2007: 4.715% to 10%) per annum.

The Group’s borrowings are denominated in functional currency of the relevant group entities.

45. BANK OVERDRAFTS

Bank overdrafts carry interest at prevailing market interest rates which range from 3.75% to 7.25% (2007: 6% to 8%) per annum.

46. CONVERTIBLE NOTES PAYABLE

CONVERTIBLE NOTES PAYABLE
Liability component: At the beginning of the year Issued during the year On acquisition of subsidiaries Interest charge Interest payable Eliminated on deemed disposal of a subsidiary At the end of the year	2008 HK$’000 556,980 191,238 – 14,584 (4,136) (565,714) 192,952	2007 HK$’000 – – 545,299 11,681 – –
		556,980

The amount as at 31st March, 2007 represented the Hanny Notes which carry interest at 2% per annum and will be matured on 15th June, 2011. The Hanny Notes are denominated in HKD, with conversion price of HK$9 per share (subject to anti-dilutive adjustments). The effective interest rate of the liability component is 6.87% per annum to the Group. Unless previously converted by the holders of the Hanny Notes, the Hanny Notes will be redeemed on the date of maturity at the principal amount of the Hanny Notes then outstanding. The amount of HK$545,299,000 as acquired through acquisition of subsidiaries in 2007 was after elimination of the portion of Hanny Notes held by the Group (note 51) and was eliminated upon the deemed disposal of Hanny during the year (note 50).

217

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

On 2nd November, 2007, the Company issued 5% convertible notes at a par value of HK$200,000,000. The convertible notes are denominated in HKD. The notes entitle the holder to convert it into ordinary shares of the Company at any time between the date of issue of the notes and their settlement date on 2nd November, 2009 at an initial conversion price of HK$0.75 per conversion share (subject to anti-dilutive adjustments), which is subsequently adjusted to HK$0.63 as a result of bonus issue of shares as disclosed in note 48. If the notes have not been converted, they will be redeemed on 2nd November, 2009. The effective interest rate of the liability component is 6.06% per annum to the Group.

47. DEFERRED TAX ASSETS (LIABILITIES)

The following table summarises the major deferred tax liabilities (assets) recognised and movements thereon during the current and prior years:

At 1st April, 2006 Charge (credit) to consolidated income statement Charge to equity Arising on acquisition of subsidiaries At 31st March, 2007 Charge (credit) to consolidated income statement Charge to equity Eliminated on deemed disposals and disposal of subsidiaries At 31st March, 2008	Accelerated tax depreciation HK$’000 1,163 21 – 21,874 23,058 2,118 – (21,914) 3,262	Revaluation of properties HK$’000 99 (1,288) 2,746 15,548 17,105 (1,086) 3,007 (14,261) 4,765	Tax losses HK$’000 (1,163) (295) – (1,078) (2,536) (1,089) – 1,449 (2,176)	Total HK$’000 99 (1,562) 2,746 36,344 37,627 (57) 3,007 (34,726) 5,851

The following is the analysis of the deferred tax balances for financial reporting purposes:

Deferred tax assets Deferred tax liabilities	2008 HK$’000 – (5,851) (5,851)	2007 HK$’000 1,464 (39,091) (37,627)

At the balance sheet date, the Group has unused tax losses of approximately HK$501,120,000 (2007: HK$495,251,000) available for offset against future profits. A deferred tax asset has been recognised in respect of approximately HK$12,434,000 (2007: HK$14,491,000) of such losses. No deferred tax asset in respect of the remaining tax losses of approximately HK$488,686,000 (2007: HK$480,760,000) has been recognised due to the unpredictability of future profit streams. Tax losses can be carried forward indefinitely.

218

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

48. SHARE CAPITAL

Number of shares Ordinary shares of HK$0.10 each Authorised: At 1st April, 2006 and 31st March, 2007 3,000,000,000 Increase during the year_(note (a) below) 7,000,000,000 At 31st March, 2008 10,000,000,000 Issued and fully paid: At 1st April, 2006 1,837,495,145 Conversion of redeemable convertible preference shares (note (b) below) 907,115 Issue of shares(note (c) below) 34,580,108 At 31st March, 2007 1,872,982,368 Conversion of redeemable convertible preference shares (note (d) below) 1,019,230 Placement of shares(note (e) below) 300,000,000 Issue of bonus shares(note (f) below) 434,800,319 Issue of shares(note (g) below) 85,803,352 At 31st March, 2008 2,694,605,269 _Notes:	Value HK$’000 300,000 700,000
	1,000,000

	183,750 90 3,458
	187,298 102 30,000 43,480 8,580
	269,460

(a) On 19th September, 2007, the authorised ordinary share capital of the Company was increased from HK$300,000,000 to HK$1,000,000,000 by the creation of 7,000,000,000 ordinary shares of HK$0.10 each.
(b) On 6th December, 2006, 907,115 ordinary shares of the Company of HK$0.10 each were issued upon the conversion of 890,000 redeemable convertible preference shares of HK$0.10 each at the conversion price of HK$1.04 per ordinary share.
(c) 25,208,848 and 9,371,260 ordinary shares of the Company of HK$0.10 each were issued in the form of a scrip dividend on 3rd November, 2006 and 27th February, 2007, respectively.
(d) On 7th August, 2007, 1,019,230 ordinary shares of the Company of HK$0.10 each were issued upon the conversion of 1,000,000 redeemable convertible preference shares of HK$0.10 each at the conversion price of HK$1.04 per ordinary share.
(e) On 29th June, 2007, 300,000,000 ordinary shares of the Company of HK$0.10 each were issued at HK$0.74 per ordinary share pursuant to a placing and subscription agreement dated 16th June, 2007 entered into between the Company, Dr. Chan Kwok Keung, Charles and a placing agent.
(f) On 5th November, 2007, 434,800,319 ordinary shares of the Company of HK$0.10 each were issued on the basis of one bonus share for every five ordinary shares held by the ordinary shareholders.
(g) 49,916,232 and 35,887,120 ordinary shares of the Company of HK$0.10 each were issued in the form of a scrip dividend on 5th November, 2007 and 14th March, 2008, respectively.

The ordinary shares issued by the Company ranked pari passu with the then existing ordinary shares of the Company in all respects.

219

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

49. SHARE OPTIONS

(a) Share options of the Company

The Company adopted a share option scheme (the “ITC Scheme”) on 16th January, 2002 (the “Adoption Date”) (which was amended on 19th September, 2007) for the purpose of providing incentive or reward to eligible persons for their contribution to, and continuing efforts to promote the interests of, the Company. The board of directors of the Company may in its absolute discretion, subject to the terms of the ITC Scheme, grant options to, inter alia, employees and directors of the Company, the controlling shareholder of the Company and invested entity and their respective subsidiaries, supplier, adviser, agent, consultant, or contractor for the provision of goods or services to any member of the Group or any invested entity and its subsidiaries and any vendor, customer or celebrity of any member of the Group or any invested entity and its subsidiaries, any person or entity that provides research, development or other technological support to any member of the Group, and any shareholder of any member of the Group or any invested entity and its subsidiaries or any holder of any securities issued by any member of the Group or any invested entity and its subsidiaries.

At the time of adoption of the ITC Scheme the aggregate number of shares which may be issued upon the exercise of all options to be granted by the Company under the ITC Scheme and any other share option scheme(s) adopted by the Company must not exceed 10% of the total number of issued shares of the Company as at the date of shareholders’ approval of the ITC Scheme. By ordinary resolution passed at the Company’s annual general meetings on 19th September, 2007 relating to the refreshing of the scheme limit on grant of options under the ITC Scheme and any other share option scheme(s) of the Company, the scheme limit on grant of options was refreshed to 217,400,159 shares of the Company. As at the date of this report, the total number of shares available for issue, save for those granted but yet to be exercised, under the ITC Scheme is 18,800,159 shares, which represented approximately 0.70% of the issued share capital of the Company as at the date of this report. Notwithstanding the foregoing, the maximum number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the ITC Scheme and any other share option scheme(s) of the Company must not, in aggregate, exceed 30% of the total number of issued shares of the Company from time to time.

Unless approved by the shareholders of the Company in general meeting, the total number of shares of the Company issued and to be issued upon exercise of the options granted and to be granted (whether exercised, cancelled or outstanding) under the ITC Scheme and any other share option scheme(s) of the Company to any eligible person in any 12-month period expiring on the date of offer shall not exceed 1% of the total number of the Company’s shares in issue from time to time. Options granted to a substantial shareholder and/or an independent non-executive director of the Company or any of their respective associates (as defined in the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange (the “Listing Rules”)) in any 12-month period in excess of 0.1% of the total number of shares of the Company in issue and have an aggregate value exceeding HK$5 million must be approved by the shareholders of the Company in general meeting in advance.

The period within which the options may be exercised will be determined by the directors of the Company at the time of grant. This period must expire in any event not later than the last day of the ten year period after the Adoption Date. The ITC Scheme does not provide for any minimum period for which an option must be held before it can be exercised. Options may be granted at an initial payment of HK$1.00 for each acceptance of grant of option(s). The directors of the Company shall specify a date, being a date not later than 30 days after (i) the date on which the offer of the options is issued, or (ii) the date on which the conditions for the offer are satisfied, by which the eligible person must accept the offer or be deemed to have declined it.

The exercise price of the options will be determined by the directors of the Company (subject to adjustments as provided in the rules of the ITC Scheme) which shall not be lower than the nominal value of the shares of the Company and shall be at least the higher of (i) the closing price of the shares of the Company as stated in the Hong Kong Stock Exchange’s daily quotations sheet on the date of the offer, which must be a business day; and (ii) the average of the closing prices of the shares of the Company as stated in the Hong Kong Stock Exchange’s daily quotations sheets for the five business days immediately preceding the date of the offer.

The ITC Scheme is valid and effective for a period of ten years commencing after the Adoption Date, after which period no further options may be granted.

220

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Details of the movements in share options of the Company granted under the ITC Scheme during the year are as follows:

Exercise price per share Category of Date of Vesting (subject to participants grant date Exercisable period adjustments) HK$ Directors 28.3.2008 28.3.2008 28.3.2008 to 27.3.2011 0.385 Employees 28.3.2008 28.3.2008 28.3.2008 to 27.3.2011 0.385 Other participants 28.3.2008 28.3.2008 28.3.2008 to 27.3.2011 0.385 Total	Number of shares of the Company to be issued upon exercise of the share options Outstanding Granted Outstanding as at during as at 1.4.2007 the year 31.3.2008 – 96,400,000 96,400,000 – 30,200,000 30,200,000 – 72,000,000 72,000,000 – 198,600,000 198,600,000	Number of shares of the Company to be issued upon exercise of the share options Outstanding Granted Outstanding as at during as at 1.4.2007 the year 31.3.2008 – 96,400,000 96,400,000 – 30,200,000 30,200,000 – 72,000,000 72,000,000 – 198,600,000 198,600,000	Number of shares of the Company to be issued upon exercise of the share options Outstanding Granted Outstanding as at during as at 1.4.2007 the year 31.3.2008 – 96,400,000 96,400,000 – 30,200,000 30,200,000 – 72,000,000 72,000,000 – 198,600,000 198,600,000
		Granted during the year 96,400,000 30,200,000 72,000,000 198,600,000	Outstanding as at 31.3.2008 96,400,000 30,200,000 72,000,000
			198,600,000

No options were exercised, cancelled or lapsed during the year. All of the outstanding share options are exercisable as at 31st March, 2008.

The fair values of the share options granted during the current year were calculated using the Binomial Model (the “Model”) carried out by Greater China Appraisal Limited, an independent valuer with no connection with the Group. The inputs into the Model and the estimated fair values of the share options granted on 28th March, 2008 were summarised as follows:

Closing share price at the date of grant	HK$0.385
Exercise price	HK$0.385
Expected volatility	47%
Expected life	3 years
Risk-free interest rate	1.601%
Expected annual dividend yield	5.83%
Fair value per share option	HK$0.0945

The Model is one of the commonly used models to estimate the fair value of the share option. The value of a share option varies with different variables of certain subjective assumptions. Any changes in the variables so adopted may materially affect the estimation of the fair value of a share option.

The expected volatility used in the Model was determined by using the annualised standard deviation of the continuously compounded rate of return on the ordinary shares of the Company. The expected life used in the Model has been adjusted, based on management’s best estimate, for the effects of non-transferability and behavioural considerations.

The total estimated fair value of approximately HK$11,964,000 and HK$6,804,000 with respect to share options granted to directors/employees of the Group and other eligible participants respectively, were charged to the consolidated income statement during the year.

As the fair value of services to be performed by other eligible participants cannot be estimated reliably, the fair value of such services is also measured with reference to the fair value of the share options granted using the Model.

(b) Share options of Trasy

(i) Pre-IPO Option Plan of Trasy

Trasy, a former subsidiary of the Company, adopted a pre-IPO share option plan (the “Trasy PreIPO Plan”) on 6th November, 2000. Pursuant to the Trasy Pre-IPO Plan, the board of directors of Trasy could, at its discretion, grant options to any full-time employees or executives of Trasy or its former ultimate holding company and their respective subsidiaries on or before 29th November, 2000 which entitle them to subscribe for shares representing up to a maximum of 10% of the shares of Trasy in issue on the date of listing on the Growth Enterprise Market of the Hong Kong Stock Exchange on 7th December, 2000.

No share options were granted under the Trasy Pre-IPO Plan during the year and prior year.

221

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(ii) Share Option Scheme of Trasy

Trasy adopted a new share option scheme (the “Trasy Scheme”) on 30th April, 2002. The purpose of the Trasy Scheme is to enable the board of directors of Trasy, at its discretion, grant options to any employees or proposed employees or executives, including executive directors, of Trasy, the controlling company and of their respective subsidiaries, non-executive directors of Trasy, any controlling company and their respective subsidiaries, any suppliers, adviser, consultant, contractor, customers, person or entity that provides research, development or other technological support to Trasy and its subsidiaries (the “Trasy Group”) or any shareholders of any members of the Trasy Group or any invested entity as incentives or rewards for their contribution to the Trasy Group.

The total number of shares may be issued upon exercise of all options to be granted under the Trasy Scheme must not, in aggregate, exceed 10% of the issued share capital of Trasy as at the date of adoption of the Trasy Scheme, unless approval by its shareholders has been obtained, and which must not in aggregate exceed 30% of the shares in issue from time to time. The maximum entitlement of each participant under the Trasy Scheme in any 12-month period up to the date of grant shall not exceed 1% of shares in issue as at the date of grant.

An option may be accepted by a proposed grantee within 7 days from the date of the offer of grant of the option upon payment of HK$1.00 to Trasy by way of consideration for the grant. There is no minimum period for which an option must be held before it can be exercised. An option may be exercised in accordance with the terms of the Trasy Scheme at any time after the date upon which the option is deemed to be granted and accepted and prior to the expiry of ten years from that date.

The exercise price in respect of any particular option granted under the Trasy Scheme shall be determined by the board of directors of Trasy and will not be less than the highest of (a) the closing price of the shares as stated in the Hong Kong Stock Exchange’s daily quotations sheet on the date of grant; (b) the average of the closing prices of the shares as stated in the Hong Kong Stock Exchange’s daily quotations sheet for the five business days immediately preceding the date of grant; and (c) the nominal value of a share.

The Trasy Scheme shall be valid and effective for a period of 10 years from the date of its adoption. Trasy granted 5,400,000 share options to employees and other eligible participant(s) during the period from 1st April, 2007 to 10th June, 2007, the date immediate before the date on which Trasy ceased to be a subsidiary of the Company and all of them remain outstanding at the date immediate before the date on which Trasy ceased to be a subsidiary of the Company. 1,510,000 outstanding share options are exercisable at the date immediate before the date on which Trasy ceased to be a subsidiary of the Company.

The closing prices of shares of Trasy immediate before 1st June, 2007 and 6th June, 2007, the dates of grants of the options, were HK$0.231 and HK$0.163 respectively. The fair values of the options determined at the dates of the grants using the Model were approximately HK$159,000 and HK$25,000, respectively. An amount of share option expense of approximately HK$69,000 has been recognised in the current year.

Date of grant	1st June, 2007	6th June, 2007
Closing share price at the date of grant	HK$0.2190	HK$0.1890
Exercise price	HK$0.2194	HK$0.2014
Expected volatility	14.34%	14.34%
Expected life	3 years	3 years
Risk-free interest rate	4.355%	4.355%
Expected annual dividend yield	Nil	Nil

The Model has been used to estimate the fair value of the options. The variables and assumptions used in computing the fair value of the share options are based on the directors’ best estimate. The value of an option varies with different variables of certain subjective assumptions.

The expected volatility used in the Model was determined by using the annualised standard deviation of the continuously compounded rate of return on the ordinary shares of Trasy. The expected life used in the Model has been adjusted, based on management’s best estimate, for the effects of non-transferability and behavioural considerations.

222

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Share options granted thereunder are exercisable in stages during the option period in the following manner:

(i) 1st one-third of share options granted become exercisable from the grant date;

(ii) 2nd one-third of share options granted shall become exercisable one year after the grant date; and

(iii) 3rd one-third of share options granted shall become exercisable two years after the grant date.

As the fair value of the services to be performed by other eligible participants cannot be estimated reliably, the fair value of such services is also measured with reference to the fair value of share options granted using the Model.

(c) Share options of Hanny

Pursuant to a resolution passed at a special general meeting of Hanny on 17th March, 2003, Hanny adopted a share option scheme (the “2003 Share Option Scheme”). Under the 2003 Share Option Scheme, the board of directors of Hanny may grant options to directors and employees of the Hanny Group and any advisors, consultants, distributors, contractors, suppliers, agents, customers, business partners, joint venture business partners, promoters and service providers of any members of the Hanny Group to whom the board of directors of Hanny considers have contributed or will contribute or can contribute to the Hanny Group. The purpose of the 2003 Share Option Scheme is to provide participants with the opportunity to acquire proprietary interests in the Hanny Group and to encourage participants to work towards enhancing the value of the Hanny Group and its shares for the benefits of the Hanny Group and its shareholders as a whole.

Subject to the condition that the total number of shares which may be issued upon the exercise of all outstanding options granted and to be exercised under the 2003 Share Option Scheme and any other schemes of Hanny must not exceed 30% of the shares of Hanny in issue from time to time, the total number of shares in respect of which options may be granted under the 2003 Share Option Scheme, when aggregated with any shares subject to any other schemes, is not permitted to exceed 10% of the shares of Hanny in issue on the date of approval and adoption of the 2003 Share Option Scheme.

Under the 2003 Share Option Scheme, the options which may be granted to any individual in any one year are not permitted to exceed 1% of the shares of Hanny in issue, without prior approval from Hanny’s shareholders. Options granted to substantial shareholders or independent non-executive directors in excess 0.1% of Hanny’s share capital or with a value in excess of HK$5 million must be approved in advance by Hanny’s shareholders.

Options granted must be taken up within 28 days from the date of grant, upon payment of HK$1 per grant. Options may be exercised at any time from the date on which the option is accepted to the tenth anniversary of the date of grant. The exercise price is determined by the directors of Hanny, and will not be less than the higher of the closing price of Hanny shares on the date of grant or the average closing price of the shares for the five business days immediately preceding the date of grant or the nominal value of the share of Hanny.

No share options were granted under the 2003 Share Option Scheme until the date immediate before the date on which Hanny ceased to be a subsidiary of the Company and during the year of 2007.

223

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

50. DEEMED DISPOSAL AND DISPOSAL OF SUBSIDIARIES

As detailed in note 13, the Company’s interests in Hanny and Trasy were reduced to below 50% and they ceased to be the subsidiaries of the Company on 18th May, 2007 and 11th June, 2007, respectively. In addition, the Company’s interests in Dreyer was disposed as detailed in note 16. The net assets of Hanny, Trasy and Dreyer at the respective disposal dates were as follows:

Net assets disposed of: Property, plant and equipment Investment properties Intangible assets Interests in associates Debt portion of convertible notes Conversion options embedded in convertible notes Deposits for acquisition of subsidiaries Deposits for acquisition of long-term investments Payments for acquisition of interest in properties Available-for-sale investments Deferred tax assets Inventories Other assets Debtors, deposits and prepayments Margin account receivables Deposits for acquisition of investments held for trading Amounts due from associates Amounts due from related companies Loans receivable Financial assets designated at fair value through profit or loss Investments held for trading Tax recoverable Short-term bank deposits, bank balances and cash Margin account payables Creditors and accrued expenses Amount due to ultimate holding company Amounts due to associates Tax payable Borrowings Bank overdrafts Convertible notes payable Deferred tax liabilities Minority interests Conversion option reserve Share option reserve Transfer to interests in associates Release of reserve on acquisition Release of translation reserve Release of investment revaluation reserve Release of other reserve (Gain) loss on deemed disposal and disposal of subsidiaries Cash and cash equivalent of subsidiaries disposed of	Hanny HK$’000 120,038 146,000 3,525 853,122 250,457 169,771 30,000 255,000 59,800 1,119,918 1,464 141 229,288 300,873 3,474 73,289 444,298 – 313,263 291,232 654,072 1,451 85,637 (6,135) (158,146) (169,000) (167,297) (74,716) (597,188) (20,613) (636,066) (36,190) 3,540,762 (2,095,962) (55,099) – 1,389,701 (1,388,988) (106) (352) (617) 97 (265) 65,024	Trasy HK$’000 534 – 250 – – – – – – 136 – – – 496 26,222 – – – – – 14,438 – 17,096 – (9,694) – – – – – – – 49,478 (24,704) – (69) 24,705 (24,716) – – – – (11) 17,096	Dreyer HK$’000 8 – – – – – – – – – – 169 – 355 – – – 21 – – – – 631 – (1,158) – (4) – – – – – 22 – – – 22 – – – – – 22 631	Total HK$’000 120,580 146,000 3,775 853,122 250,457 169,771 30,000 255,000 59,800 1,120,054 1,464 310 229,288 301,724 29,696 73,289 444,298 21 313,263 291,232 668,510 1,451 103,364 (6,135) (168,998) (169,000) (167,301) (74,716) (597,188) (20,613) (636,066) (36,190) 3,590,262 (2,120,666) (55,099) (69) 1,414,428 (1,413,704) (106) (352) (617) 97 (254) 82,751

224

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

51. ACQUISITION OF SUBSIDIARIES

In 2007, the Group acquired an additional equity interest in Hanny. Hanny and its subsidiaries are engaged in the business of securities trading, property investment and trading, holding of vessels for sand mining and strategic investments. Hanny’s shares are listed on the Hong Kong Stock Exchange and it became a subsidiary of the Company in December 2006. The acquisition had been accounted for using the purchase method. The amounts of assets and liabilities acquired by the Group, and the discount on acquisition arising in 2007 are as follows:

Hanny’s carrying
amount before
combination Adjustments
HK$’000
HK$’000
NET ASSETS ACQUIRED:
Property, plant and equipment
121,737
–
Intangible assets
3,500
–
Investment properties
143,000
–
Interests in associates
811,988
(16,975)
Conversion option embedded in convertible notes
116,303
–
Debt portion of convertible notes
239,787
9,007
Available-for-sale investments
967,994
–
Deposits for acquisition of subsidiaries
50,000
–
Deposits for acquisition of long-term investments
190,175
–
Payments for acquisition of interest in properties
57,546
–
Inventories
32
–
Other assets
229,288
–
Debtors, deposits and prepayments
335,820
–
Margin account receivables
2,501
–
Amount due from an associate
60,453
–
Amounts due from related companies
30,000
–
Financial assets designated at fair value through profit or loss
106,961
–
Investments held for trading
466,331
–
Loans receivable
442,665
–
Tax recoverable
1,095
–
Short-term bank deposits, bank balances and cash
55,348
–
Margin account payables
(6,424)
–
Creditors and accrued expense
(139,236)
–
Amounts due to associates
(138)
–
Amounts due to related companies
(190,227)
–
Amount due to ultimate holding company
(169,757)
–
Tax payable
(53,248)
–
Borrowings
(140,675)
–
Obligation under a finance lease
(111)
–
Convertible notes payable
(644,556)
17,652
Deferred tax liabilities
(36,344)
–
3,051,808
9,684
Minority interests
Convertible notes reserve_(Note)_
Less: Interests acquired in previous acquisition
– interests in an associate
– revaluation increase on net assets shared by
the Group in interest in an associate
– available-for-sale investments
– investment revaluation reserve reversed
Discount on acquisition
Share of results recognised in retained profits
SATISFIED BY:
Cash consideration paid
Net cash outflow arising on acquisitions:
Cash consideration paid
Cash and cash equivalents acquired

Fair
value
HK$’000
121,737
3,500
143,000
795,013
116,303
248,794
967,994
50,000
190,175
57,546
32
229,288
335,820
2,501
60,453
30,000
106,961
466,331
442,665
1,095
55,348
(6,424)
(139,236)
(138)
(190,227)
(169,757)
(53,248)
(140,675)
(111)
(626,904)
(36,344)
3,061,492
(1,765,646)
(59,530)
(554,332)
(4,215)
(18,681)
1,681
(370,923)
(3,143)
286,703
286,703
(286,703)
55,348
(231,355)

225

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Note:

Since a portion of Hanny Notes is held by the Group, the corresponding convertible notes reserves is eliminated after acquisition and the remaining amount of HK$55,279,000 is presented in the consolidated statement of changes in equity.

In 2007, Hanny contributed HK$41,582,000 and HK$121,535,000 to the Group’s revenue and profit for the year, between the dates of acquisition and the balance sheet date.

Had the acquisition been completed on 1st April, 2006, the Group’s revenue and profit for the year attributable to the equity holders of the Company from operations would have been approximately HK$467,255,000 and HK$527,080,000, respectively. This pro forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of the Group that actually would have been impacted had the acquisitions been completed on 1st April, 2007, nor is it intended to be a projection of future results.

The consideration paid for acquisition of interest in Hanny was based on the offer price of HK$3.8 per share, which was substantially lower than the fair value of the net assets acquired. Accordingly, a discount on acquisition of HK$370,923,000 was recognised for the year ended 31st March, 2007. Subsequent to December 2006, the Group acquired additional equity interest of 14.20% in Hanny resulting in a discount on acquisition of additional interest in subsidiaries of approximately HK$189,132,000.

52. MAJOR NON-CASH TRANSACTIONS

During the year, 1,000,000 (2007: 890,000) redeemable convertible preference shares were converted into 1,019,230 (2007: 907,115) ordinary shares of the Company at HK$1.04 per share.

In addition, 434,800,319 bonus shares of the Company were issued on the basis of one bonus share of every five shares held by the ordinary shareholders.

53. RETIREMENT BENEFIT SCHEMES

The Group operates a defined contribution scheme which is registered under the Occupational Retirement Scheme Ordinance for qualifying employees. The assets of the scheme are separately held in funds under the control of trustees.

The cost charged to the consolidated income statement represents contributions paid and payable to the funds by the Group at rates specified in the rules of the scheme. Where there are employees who leave the scheme prior to vesting fully in the contributions, the contributions payable by the Group will be reduced by the amount of forfeited contributions.

At the balance sheet date, there were no significant forfeited contributions which arose upon employees leaving the scheme prior to their interests in the Group’s contributions becoming fully vested and which are available to reduce the contributions payable by the Group in future years.

The Group also joined a Mandatory Provident Fund Scheme (the “MPF Scheme”). The MPF Scheme is registered with the Mandatory Provident Fund Schemes Authority under the Mandatory Provident Fund Scheme Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of an independent trustee. Under the rules of the MPF Scheme, the employer and its employees are each required to make contributions to the MPF Scheme at the rates specified in the rules. The only obligation of the Group with respect to the MPF Scheme is to make the required contributions under the MPF Scheme. No forfeited contributions are available to reduce the contributions payable by the Group in future years.

54. CONTINGENT LIABILITIES

Guarantees given to banks and financial institutions in respect of general facilities: – granted to an associate_(note) – granted to a third party Financial support given to an associate(note)_	2008 HK$’000 53,667 – 6,840 60,507	2007 HK$’000 56,000 23,292 8,790
		88,082

Note:

The guarantees and financial support were provided to Central Town, which have been released upon the disposal of Central Town as disclosed in note 39.

226

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

55. OPERATING LEASE ARRANGEMENTS

(a) The Group as a lessee:

At the balance sheet date, the Group had commitments for future minimum lease payments under noncancellable operating leases in respect of rented premises, which fall due as follows:

Within one year In the second to fifth year inclusive	2008 HK$’000 384 108 492	2007 HK$’000 363 327
		690

Leases are negotiated, and monthly rentals are fixed, for an average term of two years.

(b) The Group as a lessor:

At the balance sheet date, the Group had contracted with tenants for future minimum lease payments which fall due as follows:

Within one year In the second to fifth year inclusive	2008 HK$’000 596 307 903	2007 HK$’000 1,050 745
		1,795

The investment properties held have committed tenants for the next two years.

56. PLEDGE OF ASSETS

At the balance sheet date, the following assets were pledged by the Group to secure banking and other financing facilities:

Listed securities of associates Buildings Prepaid lease payments Investment properties Investments held for trading	2008 HK$’000 97,942 60,164 87,438 9,511 10,915 265,970	2007 HK$’000 92,955 44,024 89,651 150,421 101,543
		478,594

57. POST BALANCE SHEET EVENT

As disclosed in note 39, the Group disposed of its entire 50% equity interest in Central Town on 1st April, 2008. According to the Central Town Agreement, the Group had given an indemnity to the purchaser relating to taxation liabilities, if any, and the affairs and business of Central Town.

227

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

58. RELATED PARTIES TRANSACTIONS

During the year, the Group had transactions balances with the following related parties, details of which are as follows:

Class of related party Nature of transactions/balances Associates of the Group Sales of building materials by the Group Rentals and related building management fee charged by the Group Service fees charged by the Group Interest income received by the Group Interest expense paid by the Group Rental and related building management fee paid by the Group Other related companies Rental and related building management (note) fee charged by the Group Rental and related building management fee paid by the Group Interest income received by the Group	2008 HK$’000 458 2,435 1,178 35,501 1,963 72 – 60 11,789	2007 HK$’000 424 366 1,028 18,901 – 2,027 190 – 8,398

Note: A director of the Company has significant influence over the above other related companies.

Compensation of key management personnel

The directors were considered to be key management personnel of the Group. The remuneration of directors was disclosed in note 9. The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.

The discretionary bonus is based on the director’s and employee’s skills, knowledge and involvement in the Company’s affairs and are determined by reference to the Company’s performance, as well as remuneration benchmark in the industry and the prevailing market conditions.

59. BALANCE SHEET OF THE COMPANY

Total assets Total liabilities Total assets and liabilities Capital and reserves Share capital Share premium and reserves Total equity	2008 HK$’000 2,074,840 (212,792) 1,862,048 269,461 1,592,587 1,862,048	2007 HK$’000 1,978,996 (304,943)
		1,674,053

		187,298 1,486,755
		1,674,053

228

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

60. PARTICULARS OF PRINCIPAL SUBSIDIARIES

Details of the Company’s principal subsidiaries as at 31st March, 2008 and 2007 are as follows:

					Percentage of issued share	Percentage of issued share
		Issued and			capital/registered capital
	Place of	fully paid		held	by the
	incorporation/	share capital/		*Company/**		attributable
Name of subsidiary	registration	registered capital		subsidiaries		to the	Group	Principal activities
			2008		2007	2008	2007
			%		%	%	%
All Combine Investments	British Virgin	US$1	100*		100*	100	100	Investment holding
Limited	Islands	ordinary share
Burcon Group Limited	Canada	CAD1,000	100		100	100	100	Investment and
(note (a))		class A common						property holding
		shares
China Enterprises Limited	Bermuda	US$90,173	N/A		55.23	N/A	36.72	Investment holding
(“CEL”)(note (b))		common stock	(note	(c))		(note (c))
Dreyer	Hong Kong	HK$6,424,000	–		99	–	99	Trading of building
		ordinary shares						materials and
								machinery
Great Intelligence Holdings	Hong Kong	HK$2	100		100	100	100	Securities trading and
Limited		ordinary shares						treasury investment
Great Intelligence Limited	British Virgin	US$1	100*		100*	100	100	Investment holding
	Islands	ordinary share
Great Intelligence Limited	Hong Kong	HK$2	100		100	100	100	Property holding and
		ordinary shares						investment
Hanny	Bermuda	HK$2,528,243	N/A		67.23	N/A	67.23	Investment holding
		ordinary shares	(note	(d))		(note (d))
Hanny Magnetics Limited	Hong Kong	HK$1,100,000,200	N/A		100	N/A	100	Investment holding
		ordinary shares	(note	(c))		(note (c))
		HK$6,000,000
		5% non-voting
		deferred shares
		(note (e))
Hero’s Way Resources Ltd.	British Virgin	US$1	100*		100*	100	100	Investment holding
	Islands	ordinary share
Island Town Limited	Hong Kong	HK$100	N/A		100	N/A	67.23	Investment property
			(note	(c))		(note (c))		holding
ITC Development Co.	British Virgin	US$15,000	100*		100*	100	100	Investment holding
Limited	Islands	ordinary shares
ITC Finance Limited	Hong Kong	HK$2	100		100	100	100	Provision of finance
		ordinary shares
ITC Investment Holdings	British Virgin	US$1	100*		100*	100	100	Investment holding
Limited	Islands	ordinary share
ITC Management Group	British Virgin	US$2	100*		100*	100	100	Investment holding
Limited	Islands	ordinary shares
ITC Management Limited	Hong Kong	HK$2	100		100	100	100	Provision of
		ordinary shares						management and
								financial services and
								treasury investment
Large Scale Investments	British Virgin	US$1	100*		100*	100	100	Investment holding
Limited	Islands	ordinary share

229

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

					Percentage of issued share	Percentage of issued share
		Issued and			capital/registered capital
	Place of	fully paid		held	by the
	incorporation/	share capital/		*Company/**		attributable
Name of subsidiary	registration	registered capital		subsidiaries		to the	Group	Principal activities
			2008		2007	2008	2007
			%		%	%	%
MRI Holdings Limited	Australia	A$31,184,116	N/A		57.26	N/A	38.08	Investment holding
(“MRI”)(note (f))			(note	(c))		(note (c))
Trasy	Cayman Islands	HK$27,790,000	–		56.45	–	56.45	Provision and operation
		ordinary shares						of an internet-based
								precious metal
								trading system
Zhuhai Zhongce Property	British Virgin	US$1	N/A		100	N/A	67.23	Holding of land
Investment Limited	Islands		(note	(c))		(note (c))		development project
								held for sale
廣州耀陽實業有限公司	PRC	RMB1,000,000	N/A		100	N/A	67.23	Sand mining
(note (g))

None of the subsidiaries had any loan capital subsisting at the end of the year or at any time during the year.

All of the above subsidiaries are limited companies.

Notes:

(a) Burcon Group Limited operates in Canada.
(b) CEL operates in both Hong Kong and the PRC and its shares are trading on the OTC Securities Market of the United States of America.
(c) These companies are subsidiaries of Hanny, which ceased to be a subsidiary of the Group on 18th May, 2007.
(d) As disclosed in note 23 to the consolidated financial statements, Hanny ceased to be a subsidiary of the Company on 18th May, 2007.
(e) The holders of the 5% non-voting deferred shares are not entitled to receive notice of or to attend or vote at any general meetings of Hanny Magnetics Limited. The non-voting deferred shares practically carry no rights to dividends or to participate in any distribution on winding up.
(f) MRI operates in both Australia and Hong Kong and its shares are listed on the Australian Securities Exchange.
(g) This company is registered in the form of wholly-owned foreign investment enterprise and 100% owned by Hanny.

Other than the subsidiaries stated in the above notes, all of the above subsidiaries have its principal place of operation in Hong Kong.

The above table lists the subsidiaries of the Group which, in the opinion of the directors, principally affected the results of the Group for the year or formed a substantial portion of the net assets of the Group at the end of the year. To give details of other subsidiaries would, in the opinion of the directors, result in particular of excessive length.

None of the subsidiaries had issued any debt securities at the end of the year of 2008 and 2007 except for Hanny which has issued convertible notes at principal amount of HK$770,973,000, in which the Group has HK$101,742,000 interest at 31st March, 2007.

230

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. INDEBTEDNESS

(a) Borrowings

As at the close of business on 31 March 2009, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group had an aggregate outstanding borrowings of approximately HK$88.0 million comprising (i) secured bank borrowings of approximately HK$71.0 million; (ii) unsecured bank borrowings of approximately HK$12.8 million; and (iii) secured margin financing loans of approximately HK$4.2 million.

The secured bank borrowings and secured margin financing loans were secured by listed securities of associate, buildings, prepaid lease payments and investment properties. The carrying value of pledged assets as at 30 September 2008 is set out in the paragraph headed “Pledge of assets” in the “Business Review” section below.

(b) Debt securities

As at the close of business on 31 March 2009, the Group had outstanding Convertible Notes with principal amount of approximately HK$200 million. The carrying amount of the Convertible Notes on the balance sheet as at 31 March 2009 was approximately HK$197.3 million.

(c) Contingent liabilities

As at the close of business on 31 March 2009, the Group had no contingent liabilities, except that on disposal of an associate, the Group had given an indemnity to the purchaser relating to unrecorded taxation liabilities, if any, and the affairs and business of the associate up to the date of disposal.

(d) Disclaimer

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, as at the close of business on 31 March 2009, the Group did not have any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, hire purchases commitments, guarantees or other material contingent liabilities.

4. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the present financial resources and the banking facilities presently available, in the absence of unforeseen circumstances, the Group will have sufficient working capital to meet its requirements for the next twelve months from the date of this circular.

5. MATERIAL ADVERSE CHANGE

As set out in the interim report of the Group for the six months ended 30 September 2008, the Group recorded a net loss attributable to the Shareholders after minority interests of approximately HK$299.74 million for the six months ended 30 September 2008.

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 March 2008, being the date to which the latest published audited consolidated financial statements of the Group were made up.

6. BUSINESS REVIEW

Review of operations

The principal activities of the Group comprise investment holding, the provision of finance, property investment and treasury investment.

The Group held significant interests, directly and indirectly, in a number of companies listed in Hong Kong, Canada, the United States of America (“U.S.A.”), Australia and Germany, and other high-potential unlisted investments pursuant to its long-term strategy of exploring potential investments in an aggressive, but cautious, manner and enhancing a balanced and diversified investment portfolio. The following are the major listed strategic investments held by the Group:

231

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Listed strategic investments directly held

Hanny Holdings Limited (“Hanny”)

Hanny is an investment holding company. Hanny is principally engaged in the trading of securities, holding of vessels for sand mining, industrial water supply business, property development and trading, and other strategic investments including investments in (i) a subsidiary whose issued shares are listed on the Australian Securities Exchange; (ii) an associate whose issued shares are traded on the OTC Bulletin Board in the U.S.A.; (iii) associates whose issued shares are listed on the Stock Exchange; and (iv) long-term convertible notes issued by companies whose issued shares are listed on the Stock Exchange.

PYI

Based in Hong Kong, PYI focuses on infrastructure investment in and the operation of bulk cargo ports and logistics facilities in the Yangtze River region in the PRC. It also engages in land and property development in association with port facilities. In addition, PYI provides comprehensive engineering and property-related services through Paul Y. Engineering Group Limited.

ITC Properties Group Limited (“ITC Properties”)

ITC Properties is principally engaged in property development and investment in Macau, the PRC and Hong Kong. ITC Properties is also engaged in golf resort and leisure operations in the PRC, securities investment, and loan financing services.

Wing On Travel (Holdings) Limited (“Wing On Travel”)

Wing On Travel is principally engaged in the business of providing package tours, travel and other related services with branches in Hong Kong, Macau, the PRC, Canada and the United Kingdom, and hotel operation business including a hotel chain with the “Rosedale” brand in Hong Kong and the PRC.

Burcon NutraScience Corporation (“Burcon”)

Burcon is a research and development company developing a portfolio of composition, application and process patents around its plant protein extraction and purification technology. Burcon, in conjunction with Archer Daniels Midland, is commercialising versatile new canola proteins, Puratein[®] and Supertein[™] , with valuable nutritional profiles and each with unique functional properties. Burcon’s Puratein[®] and Supertein[™] are the first canola isolates to have attained GRAS status in the U.S.A.. Burcon’s goal is to develop Puratein[®] and Supertein[™] to participate in the expanding multi-billion dollar protein ingredient market, with potential uses in functional beverages, prepared foods, and nutritional supplements. Burcon has also developed Clarisoy[™] , a soy protein isolate that is 100% soluble and transparent, even in highly acidic solutions. Burcon expects Clarisoy[™] to be a next generation soy protein isolate offering all the benefits of soy protein but with minimal impact on the properties of the beverage to which it is added.

Listed strategic investments indirectly held

Paul Y. Engineering Group Limited (“Paul Y. Engineering”)

Paul Y. Engineering is an international engineering and property services group, serving Hong Kong, Macau, the PRC and the Middle East. It has three core areas of business: management contracting, property development management and property investment. Paul Y. Engineering serves a wide spectrum of distinguished clients, including the government and major enterprises.

See Corporation Limited (“See Corp”)

See Corp is principally engaged in the entertainment and media business, which includes film and TV production; music production; event production; artiste and model management; a pay TV operation; and investments in securities.

China Enterprises Limited (“China Enterprises”)

China Enterprises is principally engaged in investment holding, which includes investment in an associate which is principally engaged in manufacturing and trading of tires products in the PRC and other countries; and investment in financial assets.

232

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

MRI Holdings Limited (“MRI”)

MRI is an investment company, which has investments in securities and financial assets. MRI continues to identify appropriate, strategic investment opportunities that maximise returns to shareholders, within the clear mandate determined by shareholders of MRI.

Pledge of assets

As at 30 September 2008, certain of the Group’s properties, certain shares of associates, margin account receivables, held for trading investments and derivative financial instruments with an aggregate carrying value of approximately HK$263.8 million were pledged to banks and financial institutions to secure general facilities granted to the Group.

7. FINANCIAL AND TRADING PROSPECTS

The financial tsunami has already had a dampening effect on business activities and consumer sentiment across the globe. Looking ahead, the Group will continue to establish a prudent approach in managing its business and to maintain a sound financial management. The financial tsunami, on the other hand, allows the Group to seek investment opportunities undervalued by the market. The Group’s aggressive, but cautious, investment approach allows the Group to mitigate risks while forging for quality investments at propitious times. With its strong foundation and experience, the Group is confident of its business operations.

233

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX III

1. UNAUDITED PRO FORMA NET ASSETS STATEMENT OF THE GROUP

The unaudited pro forma net assets statement of the Group (the “Unaudited Pro Forma Net Assets Statement”) has been prepared to demonstrate the effect of the full acceptance by the Group of the provisional allotment of the PYI Rights Shares under the PYI Rights Issue (the “Proposed Transaction”).

The Unaudited Pro Forma Net Assets Statement has been prepared in accordance with paragraph 29 of Chapter 4 of the Listing Rules for the purpose of illustrating the effect of the Proposed Transaction as if the Proposed Transaction had been taken place on 30 September 2008.

The preparation of the Unaudited Pro Forma Net Assets Statement is based on the unaudited consolidated balance sheet of the Group as at 30 September 2008 which has been extracted from the published interim report of the Group for the six months ended 30 September 2008 and adjusted only to reflect the pro forma adjustment described in the notes thereto. Narrative description of the unaudited pro forma adjustment that is directly attributable to the Proposed Transaction, and is factually supportable, is summarised in the accompanying notes.

The Unaudited Pro Forma Net Assets Statement is based on a number of assumptions, estimates and uncertainties. The accompanying Unaudited Pro Forma Net Assets Statement does not purport to describe the actual financial position of the Group that would have been attained had the Proposed Transaction been completed on 30 September 2008. The Unaudited Pro Forma Net Assets Statement does not purport to predict the future financial position of the Group.

The Unaudited Pro Forma Net Assets Statement should be read in conjunction with the historical financial information of the Group as set out in the published interim report of the Group for the six months ended 30 September 2008 and other financial information included elsewhere in this circular.

234

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX III

Pro forma adjustments for The Group subscription of as at PYI Rights 30 September 2008 Shares HK$’000 HK$’000 (Unaudited) (Note 1) Non-current assets Property, plant and equipment 77,948 – Investment properties 61,523 – Prepaid lease payments 58,664 – Intangible assets 830 – Interests in associates 2,654,071 97,083 Debt portion of convertible notes 186,367 – Conversion options embedded in convertible notes 377 – Available-for-sale investments 111,227 – 3,151,007 97,083 Current assets Inventories 27 – Prepaid lease payments 1,544 – Debtors, deposits and prepayments 10,261 – Margin account receivables 125 – Amounts due from associates 262,163 – Amounts due from related companies 6,961 – Loans receivable 25,000 – Investments held for trading 8,962 – Derivative financial instruments 3,438 – Short-term bank deposits, bank balances and cash_(Note 2) 25,860 (25,860) 344,341 (25,860) Current liabilities Creditors and accrued expenses 14,763 – Dividend payable 8,596 – Amounts due to associates 2,508 – Borrowings – due within one year 2,450 – Bank overdrafts(Note 2)_ 36,910 71,223 65,227 71,223 Net current assets 279,114 (97,083) Total assets less current liabilities 3,430,121 – Non-current liabilities Borrowings – due after one year 55,200 – Convertible notes payable 195,092 – Deferred tax liabilities 9,002 – 259,294 – Net assets 3,170,827 –	Pro forma total for the Group HK$’000 77,948 61,523 58,664 830 2,751,154 186,367 377 111,227
	3,248,090
	27 1,544 10,261 125 262,163 6,961 25,000 8,962 3,438 –
	318,481
	14,763 8,596 2,508 2,450 108,133
	136,450
	182,031
	3,430,121
	55,200 195,092 9,002
	259,294
	3,170,827

Note 1: The adjustment represents the consideration to be paid by the Group for full acceptance of provisional allotment under the PYI Rights Issue. The transaction cost for the Proposed Transaction is considered immaterial.

Note 2: Since the pro forma bank balance of the Group immediately after the subscription of PYI Rights Shares is prepared as if the Proposed Transaction had been taken place on 30 September 2008, there would be a cash shortfall of approximately HK$71.2 million on 30 September 2008. The pro forma bank balance of the Group does not take into account the estimated net proceeds of approximately HK$103.8 million to be received from the rights issue of the Company as set out in the Company’s prospectus dated 29 April 2009.

235

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX III

2. LETTER ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The following is the text of a report received from the auditors of the Company, Deloitte Touche Tohmatsu, in respect of the unaudited pro forma financial information of the Group for the purpose of incorporation in this circular.

==> picture [73 x 55] intentionally omitted <==

TO THE DIRECTORS OF ITC CORPORATION LIMITED

We report on the unaudited pro forma financial information of ITC Corporation Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), which has been prepared by the directors of the Company for illustrative purposes only, for inclusion in Appendix III of the circular issued by the Company dated 21 May 2009 (the “Circular”) to provide information about how the proposed possible major transaction in respect of the subscription of the rights shares in PYI Corporation Limited, an associate of the Company, might have affected the financial information presented. The basis of preparation of the unaudited pro forma financial information is set out on pages 234 and 235 to the Circular.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants.

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The unaudited pro forma financial information is for illustrative purpose only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in future and may not be indicative of the financial position of the Group as at 30 September 2008 or any future date.

236

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX III

Opinion

In our opinion:

a) the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated;
b) such basis is consistent with the accounting policies of the Group; and
c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong

21 May 2009

237

EXPLANATORY STATEMENT ON NEW REPURCHASE MANDATE

APPENDIX IV

This is an explanatory statement given to the Shareholders relating to the proposed ordinary resolution authorising the Directors to repurchase Shares to be passed by the Shareholders at the SGM.

This explanatory statement contains a summary of the information required pursuant to Rule 10.06 of the Listing Rules which is set out as follows:

Share capital

As at the Latest Practicable Date, the authorised share capital of the Shares was 102,800,000,000 Shares, of which a total of 134,747,906 Shares were issued and fully paid.
Assuming that the Rights Issue is completed and no further Shares are issued or repurchased after the Latest Practicable Date and before the date of the SGM, there will be 673,689,530 Shares in issue, and exercise in full of the New Repurchase Mandate would result in up to a maximum of 67,368,953 Shares being repurchased by the Company during the relevant period referred to in the ordinary resolution numbered (D) of the notice of the SGM.

Reasons for repurchases

The Directors believe that it is in the best interests of the Company and the Shareholders as a whole for the Directors to have a general authority from the Shareholders to enable the Directors to purchase Shares on the market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value of the Company and/or its earnings per Share and will benefit the Company and the Shareholders.

Funding of repurchases

The repurchase of Shares shall be made with funds legally available for such purpose in accordance with the Company’s memorandum of association and bye-laws and the applicable laws of Bermuda. Under Bermuda law, repurchases may only be effected out of the capital paid up on the purchased Shares or out of funds of the Company otherwise available for dividend or distribution or out of the proceeds of a fresh issue of shares made for the purpose. Any premium payable on a purchase over the par value of the Shares to be purchased must be provided for out of funds of the Company otherwise available for dividend or distribution or out of the Company’s share premium account before the Shares are repurchased. It is envisaged that the funds required for any repurchase would be derived from such sources.
As compared to the financial position of the Company as at 31 March 2008 (being the date of the Company’s latest audited accounts), the Directors consider that the repurchases of Shares will have no material adverse impact on the working capital and the gearing position of the Company in the event that the New Repurchase Mandate were to be exercised in full at any time during the proposed repurchase period. The Directors do not propose to exercise the New Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which, in the opinion of the Directors, are from time to time appropriate for the Company.

Directors, their associates and connected persons

None of the Directors or, to the best of their knowledge having made all reasonable enquiries, any of their associates, has any present intention, in the event that the New Repurchase Mandate is approved by the Shareholders, to sell Shares to the Company.
No connected person, as defined in the Listing Rules, has notified the Company that he has a present intention to sell Shares to the Company, or has undertaken not to do so, in the event that the New Repurchase Mandate is approved by the Shareholders.

Undertaking of the Directors

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the New Repurchase Mandate in accordance with the Listing Rules, the bye-laws of the Company and the applicable laws of Bermuda.

238

EXPLANATORY STATEMENT ON NEW REPURCHASE MANDATE

APPENDIX IV

Share repurchase made by the Company

The Company had not purchased any Shares, whether on the Stock Exchange or otherwise, in the six months preceding the Latest Practicable Date.

GENERAL

If as a result of a repurchase of Shares, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition of voting rights for the purpose of the Takeovers Code. As a result, a Shareholder or a group of Shareholders acting in concert, depending on the level of increase in Shareholders’ interest, could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code. If the Company were to repurchase Shares up to the permitted maximum of 10% of its issued share capital, such parties may together with any other parties acting in concert with them become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code.

As at the Latest Practicable Date, assuming the Rights Issue was completed, Galaxyway Investments Limited, which is ultimately and beneficially owned by Dr. Chan, held 202,678,125 Shares, representing approximately 30.08% interest in the enlarged issued share capital after completion of the Rights Issue. Dr. Chan also personally held 31,588,330 Shares, representing approximately 4.69% of the enlarged issued share capital after completion of the Rights Issue. On the basis that no further Shares (except the issue of Rights Shares under the Rights Issue) are issued or repurchased and that there is no change in shareholding in the Company owned by Galaxyway Investments Limited and Dr. Chan and in the event that the New Repurchase Mandate is exercised in full, the shareholding of Galaxyway Investments Limited and Dr. Chan would, in aggregate, be increased to approximately 38.64% of the enlarged issued share capital after completion of the Rights Issue. Should such increase arise, Galaxyway Investments Limited and Dr. Chan would become obliged to make a mandatory offer for all issued Shares not already owned by them or their concert parties under Rule 26 of the Takeovers Code. The Directors have no present intention to exercise the New Repurchase Mandate to an extent which will result in the number of Shares held by the public being reduced to less than 25%.

PRICES OF THE SHARES

The highest and lowest prices at which the Shares were traded on the Stock Exchange during each of the twelve months preceding the Latest Practicable Date were as follows:


	Highest	Lowest
	HK$	HK$
2008
May	1.800*	1.600*
June	1.640*	1.380*
July	1.400*	1.144*
August	1.128*	0.880*
September	0.904*	0.560*
October	0.580*	0.396*
November	0.488*	0.416*
December	0.524*	0.432*
2009
January	0.572*	0.484*
February	0.556*	0.460*
March	0.460*	0.320*
April	0.540*	0.316*
May (up to the Latest Practicable Date)	0.600	0.500

* The prices of the Shares have been adjusted for the effect of the Capital Reorganisation.

239

GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS BY DIRECTORS

As at the Latest Practicable Date, the interests and short positions of the Directors in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code, to be notified to the Company and the Stock Exchange were as follows:

(a) Interests and short positions in Shares, underlying Shares and debentures of ITC

					Approximate %
				No. of	of the
		Long position/	No. of	underlying	issued share
Name of Director	Capacity	Short position	Shares held	Shares held	capital of ITC
					(Note 3)
Dr. Chan	Beneficial owner	Long position	31,588,330	–	4.69%
			(Note 1)
Dr. Chan	Interest of	Long position	202,678,125	–	30.08%
	controlled		(Note 1)
	corporation
	(Note 1)
Dr. Chan	Interest of	Long position	–	8,107,125	1.20%
	controlled			(Note 1)
	corporation
Dr. Chan	Beneficial owner	Long position	–	1,263,533	0.18%
				(Note 1)
Chau Mei Wah,	Beneficial owner	Long position	–	1,345,000	0.19%
Rosanna				(Note 2)
Chan Kwok Chuen,	Beneficial owner	Long position	–	600,000	0.08%
Augustine				(Note 2)
Chan Fut Yan	Beneficial owner	Long position	–	1,250,000	0.18%
				(Note 2)
Cheung Hon Kit	Beneficial owner	Long position	–	1,250,000	0.18%
				(Note 2)
Chuck, Winston Calptor	Beneficial owner	Long position	–	125,000	0.01%
				(Note 2)
Lee Kit Wah	Beneficial owner	Long position	–	125,000	0.01%
				(Note 2)
Shek Lai Him,	Beneficial owner	Long position	–	125,000	0.01%
Abraham				(Note 2)

240

GENERAL INFORMATION

APPENDIX V

Notes:

Galaxyway Investments Limited was a wholly-owned subsidiary of Chinaview International Limited which was, in turn, wholly-owned by Dr. Chan. Dr. Chan was deemed to be interested in 40,535,625 Shares and Warrants (listed equity derivatives) with rights to subscribe for 8,107,125 Shares at the current subscription price of HK$4.4 per Share (subject to adjustments) held by Galaxyway Investments Limited. Dr. Chan held 6,317,666 Shares and Warrants (listed equity derivatives) with rights to subscribe for 1,263,533 Shares at the current subscription price of HK$4.4 per Share (subject to adjustments).
Pursuant to an undertaking given by Dr. Chan dated 16 March 2009 (the “CC Undertaking Letter”), Dr. Chan had irrevocably undertaken to accept, or procure the acceptance of, the provisional allotment of 187,413,164 Rights Shares under the Rights Issue in full.
Details of outstanding share options (unlisted equity derivatives) granted to the Directors by ITC pursuant to the Share Option Scheme as at the Latest Practicable Date were as follows:

				Exercise price per
Name of			No. of	Share (subject
holder of options	Date of grant	Exercisable period*	options	to adjustments)
				HK$
Chau Mei Wah, Rosanna	28.03.2008	28.03.2008 to 27.03.2011	1,345,000	7.7
Chan Kwok Chuen,	28.03.2008	28.03.2008 to 27.03.2011	600,000	7.7
Augustine
Chan Fut Yan	28.03.2008	28.03.2008 to 27.03.2011	1,250,000	7.7
Cheung Hon Kit	28.03.2008	28.03.2008 to 27.03.2011	1,250,000	7.7
Chuck, Winston Calptor	28.03.2008	28.03.2008 to 27.03.2011	125,000	7.7
Lee Kit Wah	28.03.2008	28.03.2008 to 27.03.2011	125,000	7.7
Shek Lai Him, Abraham	28.03.2008	28.03.2008 to 27.03.2011	125,000	7.7

These share options were vested on the date of grant.
The percentage of shareholding in the Company is calculated on the assumption that the Rights Issue is completed.

241

GENERAL INFORMATION

APPENDIX V

(b) Interests and short positions in shares, underlying shares and debentures of the following associated corporations
(i) Hanny Holdings Limited (“Hanny”)

				No. of	Approximate %
			No. of	underlying	of the existing
		Long position/	shares of	shares of	issued share
Name of Director	Capacity	Short position	Hanny held	Hanny held	capital of Hanny
Dr. Chan	Interest of	Long position	200,122,352	–	49.90%
	controlled		(Note 1)
	corporation
	(Note 1)
Dr. Chan	Interest of	Long position	–	52,024,446	12.97%
	controlled			(Note 1)
	corporations
	(Note 1)
Dr. Chan	Beneficial owner	Long position	1,915,328	–	0.47%
Dr. Chan	Beneficial owner	Long position	–	562,585	0.14%
				(Note 1)
Cheung Hon Kit	Beneficial owner	Long position	1	–	0.00%
Shek Lai Him,	Beneficial owner	Long position	32	–	0.00%
Abraham
Shek Lai Him,	Beneficial owner	Long position	–	4	0.00%
Abraham				(Note 2)

Notes:

200,122,352 shares of Hanny were held by an indirect wholly-owned subsidiary of ITC. ITC, through its indirect wholly-owned subsidiaries, also held the convertible notes of Hanny (unlisted equity derivatives) with an aggregate principal amount of HK$189,959,670. Upon full conversion of such convertible notes at a conversion price of HK$15.83 per share of Hanny (subject to adjustments), 11,999,977 shares of Hanny would be issued to the indirect wholly-owned subsidiaries of ITC. ITC, through its indirect wholly-owned subsidiary, were also interested in warrants (listed equity derivatives) with rights to subscribe for 40,024,469 shares of Hanny at an initial subscription price of HK$0.63 per share of Hanny (subject to adjustments).

By virtue of his direct and deemed interests in approximately 34.78% of the existing issued share capital of ITC, Dr. Chan was deemed to be interested in these shares and underlying shares of Hanny held by the indirect wholly-owned subsidiaries of ITC.

Dr. Chan owned the convertible notes of Hanny (unlisted equity derivatives) in the principal amount of HK$2,841,810. Upon full conversion of such convertible notes at a conversion price of HK$15.83 per share of Hanny (subject to adjustments), 179,520 shares of Hanny would be issued to Dr. Chan. Dr. Chan also held warrants (listed equity derivatives) with rights to subscribe for 383,065 shares of Hanny at an initial subscription price of HK$0.63 per share of Hanny (subject to adjustments).

Hon. Shek Lai Him, Abraham held warrants (listed equity derivatives) with rights to subscribe for 4 shares of Hanny at an initial subscription price of HK$0.63 per share of Hanny (subject to adjustments).

242

GENERAL INFORMATION

APPENDIX V

(ii) PYI

					Approximate
				No. of	% of the
			No. of	underlying	issued share
		Long position/	PYI Shares	PYI Shares	capital of
Name of Director	Capacity	Short position	held	held	PYI
Dr. Chan	Interest of	Long position	404,512,565	–	8.93%
	controlled				(Note 5)
	corporation
	(Note 1)
Dr. Chan	Interest of	Long position	–	67,418,760	1.48%
	controlled			(Note 2)	(Note 5)
	corporation
	(Note 1)
Dr. Chan	Beneficial owner	Long position	944,961,161	–	20.88%
			(Note 4)		(Note 5)
Dr. Chan	Beneficial owner	Long position	–	1,996,446	0.64%
				(Note 2)	(Note 5)
Chau Mei Wah,	Beneficial owner	Long position	–	1,493,333	0.09%
Rosanna				(Note 3)
Chan Fut Yan	Beneficial owner	Long position	–	2,916,667	0.19%
				(Note 3)
Cheung Hon Kit	Beneficial owner	Long position	400	–	0.00%
Cheung Hon Kit	Beneficial owner	Long position	–	66	0.00%
				(Note 2)
Shek Lai Him,	Beneficial owner	Long position	2,000	–	0.00%
Abraham
Shek Lai Him,	Beneficial owner	Long position	–	333	0.00%
Abraham				(Note 2)

Notes:

The PYI Shares and underlying PYI Shares were held by an indirect wholly-owned subsidiary of ITC. By virtue of his direct and deemed interests in approximately 34.78% of the existing issued share capital of ITC, Dr. Chan was deemed to be interested in these PYI Shares and underlying PYI Shares held by an indirect wholly-owned subsidiary of ITC.
An indirect wholly-owned subsidiary of ITC, Dr. Chan, Mr. Cheung Hon Kit and Hon. Shek Lai Him, Abraham held PYI Warrants (listed equity derivatives) with rights to subscribe for 67,418,760 PYI Shares, 1,996,446 PYI Shares, 66 PYI Shares and 333 PYI Shares respectively at an initial subscription price of HK$1.0 per PYI Share (subject to adjustments).
Ms. Chau Mei Wah, Rosanna and Mr. Chan Fut Yan held share options (unlisted equity derivatives) (which were granted on 28 December 2004) with rights to subscribe for 1,493,333 PYI Shares and 2,916,667 PYI Shares respectively at HK$1.2857 per PYI Share (subject to adjustments) during the period from 28 December 2004 to 26 August 2012. These share options were vested on the date of grant.

243

APPENDIX V

GENERAL INFORMATION

Dr. Chan has irrevocably agreed and undertaken to PYI and the Underwriter, to accept, or procure the acceptance of, the provisional allotment of the 23,957,354 PYI Rights Shares to be allotted to him or entitles controlled by him under the PYI Rights Issue by reason of his holding of 11,978,677 PYI Shares.
- Dr. Chan has entered into a sub-underwriting agreement with the Underwriter on 29 April 2009. Under the sub-underwriting agreement, Dr. Chan has agreed, inter alia, to subscribe or procure subscribers to subscribe for up to 909,025,130 PYI Rights Shares (which include 809,025,130 PYI Rights Shares under the Participation if the Company chooses not to take up).
The percentage of shareholding in PYI is calculated on the assumption that the PYI Rights Issue is completed on the basis that no conversion or subscription rights attaching to the outstanding convertible notes, warrants and options of PYI are exercised before the Record Date.
(iii) Burcon NutraScience Corporation (“Burcon”)

				No. of
				underlying shares
				(in respect of the	Approximate %
				share options	of the existing
			No. of	(unlisted equity	issued share
		Long position/	shares of	derivatives)) of	capital of
Name of Director	Capacity	Short position	Burcon held	Burcon held	Burcon
Chau Mei Wah,	Beneficial owner	Long position	349,389	–	1.34%
Rosanna
Chau Mei Wah,	Beneficial owner	Long position	–	68,500	0.26%
Rosanna

(iv) ITC Properties Group Limited (“ITC Properties”)

					Approximate %
				No. of	of the existing
			No. of	underlying	issued share
		Long position/	shares of ITC	shares of ITC	capital of
Name of Director	Capacity	Short position	Properties held	Properties held	ITC Properties
Dr. Chan	Interest of	Long position	112,996,163	–	23.99%
	controlled
	corporations
	(Note 1)
Dr. Chan	Interest of	Long position	–	113,139,327	24.02%
	controlled			(Note 1)
	corporations
	(Note 1)
Dr. Chan	Beneficial owner	Long position	6,066,400	–	1.28%
Dr. Chan	Beneficial owner	Long position	–	761,920	0.16%
				(Note 1)
Chau Mei Wah,	Beneficial owner	Long position	3,200,000	–	0.67%
Rosanna
Chau Mei Wah,	Beneficial owner	Long position	–	1,043,653	0.22%
Rosanna				(Notes 2 & 3)
Chan Fut Yan	Beneficial owner	Long position	–	444,080	0.09%
				(Note 2)
Cheung Hon Kit	Beneficial owner	Long position	9,666,000	–	2.05%
Cheung Hon Kit	Beneficial owner	Long position	–	2,073,280	0.44%
				(Notes 2 & 3)

244

GENERAL INFORMATION

APPENDIX V

Notes:

36,593,400 shares of ITC Properties were held by an indirect wholly-owned subsidiary of ITC. 76,402,763 shares of ITC Properties were held by an indirect wholly-owned subsidiary of Hanny. An indirect wholly-owned subsidiary of ITC held a convertible note (unlisted equity derivative) of ITC Properties in the principal amount of HK$30,000,000 at a conversion price of HK$9.025 per share of ITC Properties (subject to adjustments). Upon full conversion of such convertible note, 3,324,099 shares of ITC Properties would be issued to such indirect wholly-owned subsidiary of ITC. An indirect wholly-owned subsidiary of Hanny owned convertible notes (unlisted equity derivatives) of ITC Properties in the principal amounts of HK$330,000,000 and HK$270,000,000 at conversion prices of HK$5.675 and HK$9.025 per share of ITC Properties (subject to adjustments), respectively. Upon full conversion of such convertible notes, 58,149,779 and 29,916,897 shares of ITC Properties would be issued to such indirect wholly-owned subsidiary of Hanny. An indirect wholly-owned subsidiary of ITC held warrants (listed equity derivatives) with rights to subscribe for 6,468,000 shares of ITC Properties at the subscription price of HK$2.625 per share of ITC Properties (subject to adjustments). An indirect wholly-owned subsidiary of Hanny held warrants (listed equity derivatives) with rights to subscribe for 15,280,552 shares of ITC Properties at the subscription price of HK$2.625 per share of ITC Properties (subject to adjustments). An indirect wholly-owned subsidiary of ITC owned approximately 49.90% of the existing issued share capital of Hanny and Dr. Chan directly held approximately 0.47% of the existing issued share capital of Hanny. By virtue of his direct and deemed interests in approximately 34.78% of the existing issued share capital of ITC, Dr. Chan was deemed to be interested in these shares and underlying shares of ITC Properties held by the subsidiaries of Hanny and ITC.

Dr. Chan held warrants (listed equity derivatives) with rights to subscribe for 761,920 shares of ITC Properties at the subscription price of HK$2.625 per share of ITC Properties (subject to adjustments).

Details of outstanding share options (unlisted equity derivatives) granted to the Directors by ITC Properties as at the Latest Practicable Date were as follows:

				Exercise price
				per share of
				ITC Properties
Name of			No. of	(subject to
optionholder	Date of grant	Exercisable period*	share options	adjustments)
				HK$
Chau Mei Wah,	27.07.2007	27.07.2007 to 26.07.2011	190,320	10.55
Rosanna
Chan Fut Yan	27.07.2007	27.07.2007 to 26.07.2011	444,080	10.55
Cheung Hon Kit	27.07.2007	27.07.2007 to 26.07.2011	761,280	10.55

In relation to the grant of share options on 27 July 2007 subject to the terms and conditions of the share option scheme of ITC Properties adopted on 26 August 2002, the share options shall be exercisable at any time during the option period and subject further to a maximum of 50% of the share options shall be exercisable during the period commencing from 27 July 2008 to 26 July 2009, with the balance of the share options not yet exercised may be exercised during the period commencing from 27 July 2009 to 26 July 2011.
Ms. Chau Mei Wah, Rosanna and Mr. Cheung Hon Kit held warrants (listed equity derivatives) with rights to subscribe for 853,333 shares of ITC Properties and 1,312,000 shares of ITC Properties respectively at the subscription price of HK$2.625 per share of ITC Properties (subject to adjustments).

As at the Latest Practicable Date, Hanny, PYI, Burcon and ITC Properties were associated corporations of ITC within the meaning of Part XV of the SFO.

Dr. Chan was, by virtue of his direct and deemed interests in approximately 34.78% of the existing issued share capital of ITC, deemed to be interested in the shares and underlying shares (in respect of equity derivatives), if any, of the associated corporations (within the meaning of Part XV of the SFO) of ITC held by the Group under Part XV of the SFO.

245

GENERAL INFORMATION

APPENDIX V

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code to be notified to the Company and the Stock Exchange.

3. INTERESTS OF SUBSTANTIAL SHAREHOLDERS/OTHER PERSONS RECORDED IN THE REGISTER KEPT UNDER THE SFO

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons had interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

(a) Interests and short positions of substantial Shareholders in the Shares and underlying Shares

				No. of	Approximate
				underlying	% of the
				Shares	issued share
		Long position/	No. of	(listed equity	capital
Name	Capacity	Short position	Shares held	derivatives) held	of ITC
					(Note 2)
Dr. Chan	Beneficial owner	Long position	31,588,330	–	4.68%
			(Note 1)
Dr. Chan	Beneficial owner	Long position	–	1,263,533	0.18%
				(Note 1)
Dr. Chan	Interest of controlled	Long position	202,678,125	–	30.08%
	corporation		(Note 1)
	(Note 1)
Dr. Chan	Interest of controlled	Long position	–	8,107,125	1.20%
	corporation			(Note 1)
	(Note 1)
Chinaview International	Interest of controlled	Long position	202,678,125	–	30.08%
Limited	corporation		(Note 1)
	(Note 1)
Chinaview International	Interest of controlled	Long position	–	8,107,125	1.20%
Limited	corporation			(Note 1)
	(Note 1)
Galaxyway Investments	Beneficial owner	Long position	202,678,125	–	30.08%
Limited			(Note 1)
Galaxyway Investments	Beneficial owner	Long position	–	8,107,125	1.20%
Limited				(Note 1)

246

APPENDIX V

GENERAL INFORMATION

				No. of	Approximate
				underlying	% of the
				Shares	issued share
		Long position/	No. of	(listed equity	capital
Name	Capacity	Short position	Shares held	derivatives) held	of ITC
					(Note 2)
Ng Yuen Lan, Macy	Interest of spouse	Long position	234,266,455	–	34.78%
	(Note 1)
Ng Yuen Lan, Macy	Interest of spouse	Long position	–	9,370,658	1.39%
	(Note 1)			(Note 1)
Get Nice Holdings Limited	Interest of controlled	Long position	351,538,460	–	52.18%
	corporation		(Note 3)
	(Note 3)
Get Nice Incorporated	Interest of controlled	Long position	351,538,460	–	52.18%
	corporation		(Note 3)
	(Note 3)
Get Nice Securities	Beneficial owner	Long position	351,538,460	–	52.18%
Limited			(Note 3)

Notes:

Galaxyway Investments Limited was a wholly-owned subsidiary of Chinaview International Limited which was, in turn, wholly-owned by Dr. Chan. Ms. Ng Yuen Lan, Macy is the spouse of Dr. Chan. Chinaview International Limited, Dr. Chan and Ms. Ng Yuen Lan, Macy were deemed to be interested in 202,678,125 Shares and Warrants (listed equity derivatives) with rights to subscribe for 8,107,125 Shares at the current subscription price of HK$4.4 per Share (subject to adjustments) interested by Galaxyway Investments Limited. Dr. Chan personally interested in 31,588,330 Shares and Warrants (listed equity derivatives) with rights to subscribe for 1,263,533 Shares at the current subscription price of HK$4.4 per Share (subject to adjustments). Ms. Ng Yuen Lan, Macy was deemed to be interested in the Shares and the Warrants held by Dr. Chan. The above interests in Shares have taken into account the interests of Dr. Chan under the CC Undertaking Letter.
The percentage of shareholding in the Company is calculated on the assumption that the Rights Issue is completed.
These are the Rights Shares, based on the number of Shares in issue as at the record date of the Rights Issue, which Get Nice Securities Limited has underwritten pursuant to the underwriting agreement made between ITC and Get Nice Securities Limited dated 16 March 2009 in relation to the Rights Issue. Get Nice Securities Limited is wholly-owned by Get Nice Incorporated which in turn is wholly-owned by Get Nice Holdings Limited.

247

GENERAL INFORMATION

APPENDIX V

(b) Interests and short positions of other persons in the Shares and underlying Shares

				Approximate %
				of the
		Long position/	No. of	issued share
Name	Capacity	Short position	Shares held	capital of ITC
			(Note 1)	(Note 2)
Paul G. Desmarais	Interest of controlled	Long position	46,572,020	6.91%
	corporations_(Note 1)_
Nordex Inc.	Interest of controlled	Long position	46,572,020	6.91%
	corporations_(Note 1)_
Gelco Enterprises Ltee	Interest of controlled	Long position	46,572,020	6.91%
	corporations_(Note 1)_
Power Corporation	Interest of controlled	Long position	46,572,020	6.91%
of Canada	corporations_(Note 1)_
2795957 Canada Inc.	Interest of controlled	Long position	46,572,020	6.91%
	corporations_(Note 1)_
171263 Canada Inc.	Interest of controlled	Long position	46,572,020	6.91%
	corporations_(Note 1)_
Power Financial	Interest of controlled	Long position	46,572,020	6.91%
Corporation	corporations_(Note 1)_
IGM Financial Inc.	Interest of controlled	Long position	46,572,020	6.91%
	corporations_(Note 1)_
Mackenzie Inc.	Interest of controlled	Long position	46,572,020	6.91%
	corporations_(Note 1)_
Mackenzie Financial	Interest of controlled	Long position	46,572,020	6.91%
Corporation	corporations_(Note 1)_

Notes:

So far as known to the Directors, Mackenzie Cundill Investment Mgmt. (Bermuda) Ltd. was interested in 51,228,086 shares of the Company (before Capital Reorganisation). Mackenzie Cundill Investment Mgmt. (Bermuda) Ltd. was a wholly-owned subsidiary of Mackenzie (Rockies) Corp., which in turn was a whollyowned subsidiary of Mackenzie Financial Corporation. Mackenzie Cundill Investment Management Ltd., a wholly-owned subsidiary of Mackenzie Financial Corporation, was deemed to be interested in 135,060,000 shares of the Company (before Capital Reorganisation) held by Mackenzie Financial Capital Corporation. Mackenzie Financial Capital Corporation was a wholly-owned subsidiary of Mackenzie Financial Corporation. Mackenzie Financial Corporation was a wholly-owned subsidiary of Mackenzie Inc. which was, in turn, a wholly-owned subsidiary of IGM Financial Inc. of which Power Financial Corporation held approximately 55.99% shareholding interests. 171263 Canada Inc., a wholly-owned subsidiary of 2795957 Canada Inc., owned approximately 66.40% shareholding interests in Power Financial Corporation. 2795957 Canada Inc. was a wholly-owned subsidiary of Power Corporation of Canada of which Gelco Enterprises Ltee owned approximately 54.18% voting shareholding interests. Nordex Inc., a company which was owned as to 68.00% by Mr. Paul G. Desmarais, owned approximately 94.95% shareholding interests in Gelco Enterprises Ltee.

By virtue of the SFO, each of Mr. Paul G. Desmarais, Nordex Inc., Gelco Enterprises Ltee, Power Corporation of Canada, 2795957 Canada Inc., 171263 Canada Inc., Power Financial Corporation, IGM Financial Inc., Mackenzie Inc., Mackenzie Financial Corporation and Mackenzie Cundill Investment Management Ltd. was deemed to be interested in the Shares in which Mackenzie Cundill Investment Mgmt. (Bermuda) Ltd. and Mackenzie Financial Capital Corporation were interested.

The shareholding in the Company was calculated on the assumption that the entitlements of the Rights Shares were fully accepted by these corporations.

The percentage of shareholding in the Company is calculated on the assumption that the Rights Issue is completed.

248

APPENDIX V

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, no person had interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or any options in respect of such capital.

4. DIRECTORS’ INTERESTS IN ASSETS, CONTRACTS AND COMPETING BUSINESSES

(i) As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been acquired, disposed of by or leased to or which are proposed to be acquired, disposed of by or leased to any member of the Group, since 31 March 2008, the date to which the latest published audited financial statements of the Group were made up.
(ii) There is no contract or arrangement entered into by any member of the Group subsisting as at the Latest Practicable Date in which any of the Directors is materially interested and which is significant in relation to the business of the Group as a whole.
(iii) As at the Latest Practicable Date, none of the Directors and their respective associates were interested in any business apart from the Group’s businesses which competes or is likely to compete, either directly or indirectly, with the Group’s businesses pursuant to Rule 8.10 of the Listing Rules.

5. EXPERT

The following is the qualification of the expert who has given opinion contained in this circular:

Name	Qualification
Deloitte Touche Tohmatsu (“DTT”)	Certified Public Accountants

As at the Latest Practicable Date, DTT did not have direct or indirect shareholdings in any member of the Group, or any right to subscribe for or to nominate persons to subscribe for securities in any member of the Group, or any interests, directly or indirectly, in any assets which have been acquired, disposed of by or leased to or which are proposed to be acquired, disposed of by or leased to the Company or any of their respective subsidiaries, respectively, since 31 March 2008, the date to which the latest published audited financial statements of the Group were made up.

DTT has given and has not withdrawn its written consent to the issue of this circular with the inclusion therein of its reports or letters and references to its name in the form and context in which they respectively appear.

6. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into any service contracts with the Company or any other member of the Group (excluding contracts expiring or which may be terminated by the Company within a year without payment of any compensation (other than statutory compensation)).

7. LITIGATION

As at the Latest Practicable Date, so far as the Directors are aware, no member of the Group was engaged in any litigation, arbitration or claim of material importance and there was no litigation, arbitration or claim of material importance known to the Directors to be pending or threatened against any member of the Group.

8. MATERIAL CONTRACTS

The following contracts have been entered into by the Group (not being contracts entered into in the ordinary course of business) within the two years immediately preceding the Latest Practicable Date and which are or may be material:

(i) the placing and subscription agreement dated 12 June 2007 entered into between ITC, Trasy Gold Ex Limited (“Trasy”) and Taifook Securities Company Limited (“Taifook Securities”) pursuant to which Taifook Securities, as placing agent of ITC, agreed to place, on a fully-underwritten basis, 550,000,000 shares of Trasy at the price of HK$0.20 per share on behalf of ITC and ITC agreed to subscribe for 550,000,000 new shares of Trasy at the price of HK$0.20 per share;

249

APPENDIX V

GENERAL INFORMATION

(ii) the placing and subscription agreement dated 16 June 2007 entered into between Dr. Chan, ITC and Kingston Securities Limited (“Kingston Securities”) pursuant to which Kingston Securities, as placing agent of Dr. Chan, agreed to place, on a fully-underwritten basis, 300,000,000 Shares (before the Capital Reorganisation) at the price of HK$0.74 per Share and Dr. Chan agreed to subscribe for 300,000,000 new Shares (before the Capital Reorganisation) at the price of HK$0.74 per Share;
(iii) the conditional subscription agreement dated 28 June 2007 entered into between ITC and Trasy in relation to the subscription of up to 340,000,000 new shares of Trasy at the price of HK$0.205 per share. On 23 August 2007, Trasy and ITC entered into a termination agreement to terminate the conditional subscription agreement;
(iv) the conditional subscription agreement dated 29 June 2007 (as supplemented by a letter dated 23 August 2007) entered into between ITC and Trasy in relation to the subscription of 4% convertible notes of Trasy in the principal amount of HK$50,000,000 (subject to any increase of an amount up to the additional amount as mentioned therein), which agreement was lapsed on 31 October 2007;
(v) the sale and purchase agreement dated 9 August 2007 entered into between Famex Investment Limited and Mr. Hung Hon Man in relation to the conditional acquisition of the convertible bonds of Hanny in an aggregate principal amount of HK$88,217,520 at a consideration of HK$69,691,840 in cash;
(vi) the conditional subscription agreement dated 24 August 2007 entered into between ITC and Hanny in relation to the subscription of up to 499,000,000 new shares of Hanny at the price of HK$0.35 per share. The subscription price was adjusted to HK$0.29 per share by the supplemental agreement dated 10 September 2007 entered into between ITC and Hanny;
(vii) the placing and subscription agreement dated 27 August 2007 entered into between Golden Hall Holdings Limited (“Golden Hall”), an indirect wholly-owned subsidiary of ITC, Trasy and Kingston Securities pursuant to which Kingston Securities, as placing agent of Golden Hall, agreed to place, on a fully-underwritten basis, 330,000,000 shares of Trasy at the price of HK$0.19 per share on behalf of Golden Hall and Golden Hall agreed to subscribe for 330,000,000 new shares of Trasy at the price of HK$0.19 per share;
(viii) the placing agreement dated 5 September 2007 entered into between ITC and Taifook Securities pursuant to which Taifook Securities, as a placing agent of ITC, agreed to place, on a best effort basis, the Convertible Notes up to a maximum aggregate principal amount of HK$200,000,000 at an initial conversion price of HK$0.75 per Share, which was adjusted to HK$12.2 per Share as a result of the Capital Reorganisation;
(ix) the placing and subscription agreement dated 12 September 2007 entered into between Golden Hall, Trasy and Kingston Securities pursuant to which Kingston Securities, as placing agent of Golden Hall, agreed to place, on a fully-underwritten basis, 335,000,000 shares of Trasy at the price of HK$0.162 per share on behalf of Golden Hall and Golden Hall agreed to subscribe for 335,000,000 new shares of Trasy at the price of HK$0.162 per share;
(x) the contract note for disposal by Golden Hall of 1,197,451,139 shares of Trasy at the price of HK$0.10 per share on 28 September 2007;
(xi) the contract notes for acquisitions by Great Intelligence Holdings Limited and Selective Choice Investments Limited, both the indirect wholly-owned subsidiaries of ITC, of an aggregate of 200,125,000 shares of ITC Properties at an aggregate consideration of approximately HK$85.0 million during the period from 16 October 2007 to 18 January 2008;
(xii) the contract notes for acquisitions by Asia Will Limited (“Asia Will”), an indirect wholly-owned subsidiary of ITC, of an aggregate of 257,646,000 shares of Wing On Travel (Holdings) Limited (“Wing On Travel”) at an aggregate consideration of approximately HK$104.6 million during the period from 15 November 2007 to 18 January 2008;
(xiii) the sale and purchase agreement dated 1 April 2008 entered into between United Sun Investments Limited (“United Sun”), Onstart Profits Limited, The Bank of East Asia, Limited, ITC and Mr. Cheung Shu Wan in relation to the sale of 1 ordinary share of Central Town Limited (“Central Town”), representing 50% of the issued share capital of Central Town, and the assignment of the shareholder’s loan owing by Central Town to United Sun, the then indirect wholly-owned subsidiary of ITC, at a total consideration of HK$145,000,000;

250

GENERAL INFORMATION

APPENDIX V

(xiv) the irrevocable undertaking dated 15 May 2008 executed by ITC under which ITC had irrevocably undertaken, among other things, to accept or procure the acceptance of the provisional allotment of 1,035,384,000 rights shares (with bonus warrants) to ITC and/or its subsidiary(ies) at the subscription price of HK$0.06 per rights share pursuant to the rights issue of Wing On Travel;
(xv) the irrevocable undertaking dated 9 September 2008 executed by ITC under which ITC had irrevocably undertaken, among other things, to accept or procure the acceptance of the provisional allotment of 200,122,352 rights shares (with bonus warrants) to ITC and/or its subsidiary(ies) at the subscription price of HK$0.50 per rights share pursuant to the rights issue of Hanny. On 3 November 2008, the undertakings given by ITC were automatically lapsed as the rights issue of Hanny was not proceeded;
(xvi) the irrevocable undertaking dated 6 January 2009 executed by ITC under which ITC had irrevocably undertaken, among other things, to subscribe, or procure the subscription, for 150,091,764 offer shares (with warrants) to ITC and/or its subsidiary(ies) at the subscription price of HK$0.35 per offer share pursuant to the open offer of Hanny;
(xvii) an underwriting agreement dated 16 March 2009 entered into between the Company and Get Nice Securities Limited in relation to the underwriting arrangement in respect of the Rights Issue;
(xviii) the Undertaking;
(xix) a sale and purchase agreement dated 18 May 2009 entered into between Asia Will and Citystar Limited in relation to the acquisition of convertible exchangeable notes of Wing On Travel in the principal amount of HK$34,000,000 by Asia Will at the consideration of HK$26,520,000; and
(xx) a sale and purchase agreement dated 18 May 2009 entered into between Asia Will and Eversun Limited in relation to the acquisition of convertible exchangeable notes of Wing On Travel in the principal amount of HK$24,200,000 by Asia Will at the consideration of HK$18,876,000.

9. GENERAL

(i) The secretary of ITC is Mr. Lee Hon Chiu, CPA, FCCA .
(ii) The registered office of ITC is at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and the head office and principal place of business of ITC in Hong Kong is at 30th Floor, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong.
(iii) The principal share registrar and transfer office of ITC is Butterfield Fulcrum Group (Bermuda) Limited of Rosebank Centre, 11 Bermudiana Road, Pembroke HM 08, Bermuda and the branch share registrar and transfer office and the warrant registrar of ITC in Hong Kong is Tricor Secretaries Limited of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(iv) The English texts of this circular and the accompanying form of proxy shall prevail over their respective Chinese texts for the purpose of interpretation.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours on any weekday (except Saturday and public holidays) at the office of Iu, Lai & Li, Solicitors at 20th Floor, Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong from the date of this circular up to and including the date of the SGM:

(a) the memorandum of association and the bye-laws of the Company;
(b) the annual reports of the Company for the three financial years ended 31 March 2006, 31 March 2007 and 31 March 2008 and the interim report of the Company for the six months ended 30 September 2008;
(c) circulars issued by the Company dated 22 April 2008, 3 June 2008, 29 September 2008 and 9 April 2009 respectively;
(d) the letter on the unaudited pro forma financial information of the Group issued by DTT as set out in appendix III to this circular;
(e) the material contracts disclosed in the paragraph headed “Material contracts” in this appendix; and
(f) the written consent referred to in the paragraph headed “Expert” in this appendix.

251

NOTICE OF THE SGM

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(Incorporated in Bermuda with limited liability) (Stock Code: 372) (Warrant Code: 779)

NOTICE IS HEREBY GIVEN that a special general meeting of ITC Corporation Limited (the “ Company ”) will be held at B27, Basement, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong on Monday, 8 June 2009 at 11:00 a.m. for the purpose of considering and, if thought fit, passing the following resolutions:

ORDINARY RESOLUTIONS

(A) “ THAT the proposed acceptance by the Company, through its subsidiary(ies), of the provisional allotment from PYI Corporation Limited (“ PYI ”) of not less than 809,025,130 new shares of PYI (the “ PYI Shares ”) in full pursuant to the proposed issue by PYI by way of rights of new PYI Shares at a subscription price of HK$0.12 per PYI Share on the basis of two new PYI Shares for every PYI Share held as more particularly set out in the announcement of PYI dated 30 April 2009, a copy of which has been produced to this meeting and marked “A” and initialled by the chairman of the meeting for the purpose of identification, be and is hereby approved and the directors of the Company be and are hereby authorised to sign and execute all such documents and to do all acts, deeds and things as they may in their absolute discretion consider necessary, appropriate, desirable, or expedient to give effect to or in connection with all transactions contemplated in this resolution.”
(B) “ THAT subject to and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of and permission to deal in the ordinary shares in the share capital of the Company as representing 10% of the ordinary shares of the Company in issue as at the date of the passing of this resolution, which may fall to be issued pursuant to the exercise of options granted under the Company’s share option scheme adopted on 16 January 2002 (as amended on 19 September 2007) (the “ Share Option Scheme ”) and any other scheme(s) of the Company:
(i) approval be and is hereby granted for refreshing the 10% scheme mandate under the Share Option Scheme (the “ Refreshed Scheme Mandate ”) such that the total number of shares of the Company which may be allotted and issued upon the exercise of all options to be granted under the Share Option Scheme and any other scheme(s) of the Company under the limit as refreshed hereby shall not exceed 10% of the aggregate nominal amount of the issued share capital of the Company in issue as at the date of the passing of this resolution (options previously granted under the Share Option Scheme and any other scheme(s) of the Company (including options outstanding, cancelled, lapsed or exercised in accordance with the terms of the Share Option Scheme or any other scheme(s) of the Company shall not be counted for the purpose of calculating the Refreshed Scheme Mandate)); and
(ii) the directors of the Company be and are hereby authorised, in their absolute discretion (a) to grant options to subscribe for shares of the Company within the Refreshed Scheme Mandate in accordance with the rules of the Share Option Scheme and any other scheme(s) of the Company; and (b) to allot, issue and deal with shares of the Company pursuant to the exercise of options granted under the Share Option Scheme and any other scheme(s) of the Company within the Refreshed Scheme Mandate.”
(C) “ THAT :
(i) subject to paragraph (iii) below, the exercise by the directors of the Company during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional shares in the share capital of the Company and to make or grant offers, agreements and options (including warrants, bonds and debentures convertible into shares of the Company) which would or might require the exercise of such powers, subject to and in accordance with all applicable laws and the bye-laws of the Company, be and is hereby generally and unconditionally approved;

252

NOTICE OF THE SGM

(ii) the approval in paragraph (i) above shall authorise the directors of the Company during the Relevant Period to make or grant offers, agreements and options (including warrants, bonds and debentures convertible into shares of the Company) which would or might require the exercise of such powers after the end of the Relevant Period;
(iii) the aggregate nominal amount of the share capital of the Company allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) and issued by the directors of the Company pursuant to the approvals in paragraphs (i) and (ii) above, otherwise than pursuant to (a) a Rights Issue (as hereinafter defined); (b) an issue of shares as scrip dividends pursuant to the bye-laws of the Company from time to time; (c) an issue of shares of the Company upon the exercise of rights of subscription or conversion under the terms of any securities which are convertible into shares of the Company; or (d) an issue of shares of the Company under any share option scheme of the Company or similar arrangement for the time being adopted for the grant or issue of shares or rights to acquire shares of the Company, shall not exceed 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the passing of this resolution and the said approval shall be limited accordingly;
(iv) for the purpose of this resolution,

“ Relevant Period ” means the period from the passing of this resolution until whichever is the earliest of:

(a) the conclusion of the next annual general meeting of the Company;
(b) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company or any applicable law of Bermuda to be held; and
(c) the date on which the authority set out in this resolution is revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting.

“ Rights Issue ” means an offer of shares of the Company open for a period fixed by the directors of the Company to the holders of shares of the Company whose names appear on the register of members of the Company on a fixed record date in proportion to their then holdings of such shares as at that date (subject to such exclusions or other arrangements as the directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of, any recognised regulatory body or any stock exchange in, any territory applicable to the Company); and

(v) the general mandate granted to the directors of the Company to exercise the powers of the Company to allot, issue and deal with the shares of the Company at the annual general meeting of the Company held on 30 September 2008 be and is hereby revoked (without prejudice to any valid exercise of such general mandate prior to the date on which this resolution becomes effective).”

(D) “ THAT :

(i) subject to paragraph (iii) below, the exercise by the directors of the Company during the Relevant Period (as hereinafter defined) of all the powers of the Company to repurchase issued ordinary shares in the share capital of the Company on The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) or on any other stock exchange on which the securities of the Company may be listed and recognised by the Securities and Futures Commission of Hong Kong and the Stock Exchange for this purpose, subject to and in accordance with all applicable laws and the requirements of the Rules Governing the Listing of Securities on the Stock Exchange or any other stock exchange as amended from time to time, be and is hereby generally and unconditionally approved;
(ii) the approval in paragraph (i) above shall be in addition to any other authorisation given to the directors of the Company and shall authorise the directors of the Company on behalf of the Company during the Relevant Period to procure the Company to repurchase its shares at a price determined by the directors of the Company;

253

NOTICE OF THE SGM

(iii) the aggregate nominal amount of shares of the Company which the directors of the Company are authorised to repurchase pursuant to the approval in paragraphs (i) and (ii) above shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the passing of this resolution and the said approval shall be limited accordingly;
(iv) for the purpose of this resolution:
- “ Relevant Period ” means the period from the date of the passing of this resolution until whichever is the earliest of:
- (a) the conclusion of the next annual general meeting of the Company;
- (b) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company or any applicable law of Bermuda to be held; or
- (c) the date on which the authority set out in this resolution is revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting; and
(v) the general mandate granted to the directors of the Company to exercise the powers of the Company to repurchase issued shares of the Company at the annual general meeting of the Company held on 30 September 2008 be and is hereby revoked (without prejudice to any valid exercise of such general mandate prior to the date on which this resolution becomes effective).”
(E) “ THAT conditional upon the resolutions numbered (C) and (D) as set out in the notice convening this meeting (the “ Notice ”) being passed, the general mandate granted to the directors of the Company to allot, issue and deal with additional shares in the share capital of the Company pursuant to the resolution numbered (C) as set out in the Notice be and is hereby extended by the addition thereto of an amount representing the aggregate nominal amount of shares in the share capital of the Company repurchased by the Company under the authority granted pursuant to the resolution numbered (D) as set out in the Notice.”

By order of the Board of ITC Corporation Limited Lee Hon Chiu Company Secretary

Hong Kong, 21 May 2009

Notes:

Any shareholder of the Company entitled to attend and vote at the meeting of the Company may appoint another person as his proxy to attend and vote instead of him. A shareholder who is the holder of two or more shares of the Company may appoint more than one proxy to represent him and vote on his behalf at the meeting. A proxy need not be a shareholder of the Company.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised.
A form of proxy for use at the meeting is enclosed. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such power or authority, together with such evidence as the board of directors of the Company may require under the bye-laws of the Company, shall be deposited at the Company’s principal place of business in Hong Kong at 30th Floor, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong, as soon as possible but in any event not less than 48 hours before the time for holding the meeting or the adjournment thereof (as the case may be) at which the person named in such instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid.
Completion and return of an instrument appointing a proxy shall not preclude a shareholder of the Company from attending and voting in person at the meeting or any adjournment thereof or upon the poll concerned and, in such event, the instrument appointing a proxy shall be deemed to have been revoked.

254

NOTICE OF THE SGM

Where there are joint registered holders of any share, any one of such persons may vote at the meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders is present at the meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.

As at the date of this notice, the directors of the Company are as follows:

Executive directors: Dr. Chan Kwok Keung, Charles (Chairman) Ms. Chau Mei Wah, Rosanna (Deputy Chairman and Managing Director) Mr. Chan Kwok Chuen, Augustine Mr. Chan Fut Yan Mr. Cheung Hon Kit Mr. Chan Yiu Lun, Alan

Independent non-executive directors: Mr. Chuck, Winston Calptor Mr. Lee Kit Wah Hon. Shek Lai Him, Abraham, SBS, JP

255

AI assistant

Hopefluent Group Holdings Limited — Proxy Solicitation & Information Statement 2009

49433_rns_2009-05-20_703d56d9-ed34-4213-8d90-9902a94c2270.pdf

(1) POSSIBLE MAJOR TRANSACTION – SUBSCRIPTION OF THE RIGHTS SHARES IN PYI CORPORATION LIMITED;

(2) REFRESHMENT OF THE 10% LIMIT ON GRANT OF OPTIONS UNDER THE SHARE OPTION SCHEME; AND (3) REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES AND TO REPURCHASE SHARES

Financial Adviser

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

(1) POSSIBLE MAJOR TRANSACTION – SUBSCRIPTION OF THE RIGHTS SHARES IN PYI CORPORATION LIMITED; (2) REFRESHMENT OF THE 10% LIMIT ON GRANT OF OPTIONS UNDER THE SHARE OPTION SCHEME; AND (3) REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES AND TO REPURCHASE SHARES

INTRODUCTION

PROPOSED PYI RIGHTS ISSUE

LETTER FROM THE BOARD

INFORMATION ON PYI AND REASONS OF THE PYI RIGHTS ISSUE

BUSINESS REVIEW AND PROSPECTS OF PYI AS EXTRACTED FROM THE INTERIM REPORT OF PYI FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008

Financial results

LETTER FROM THE BOARD

Prospects

LETTER FROM THE BOARD

REASONS FOR THE PARTICIPATION

EFFECT ON EARNINGS AND ASSETS AND LIABILITIES OF THE COMPANY

UNDERTAKING AND SUB-UNDERWRITING BY DR. CHAN

LETTER FROM THE BOARD

REFRESHMENT OF SCHEME MANDATE LIMIT

LETTER FROM THE BOARD

REFRESHMENT OF ISSUE MANDATE

REFRESHMENT OF REPURCHASE MANDATE

LETTER FROM THE BOARD

THE SGM

RECOMMENDATION

ADDITIONAL INFORMATION

1. SUMMARY OF FINANCIAL INFORMATION OF PYI GROUP

RESULTS

ASSETS AND LIABILITIES

2. UNAUDITED ACCOUNTS OF THE PYI GROUP FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008

Condensed Consolidated Income Statement

Condensed Consolidated Balance Sheet

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Condensed Consolidated Statement of Changes in Equity

APPENDIX I

Condensed Consolidated Cash Flow Statement

Notes to the Condensed Consolidated Financial Statements

1. BASIS OF PREPARATION

2. PRINCIPAL ACCOUNTING POLICIES

Government grants

3. SEGMENT INFORMATION

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

APPENDIX I

4. OTHER INCOME

5. PROFIT BEFORE TAXATION

APPENDIX I

6. TAXATION

7. DISTRIBUTION

8. EARNINGS PER SHARE

9. INVESTMENT PROPERTIES

APPENDIX I

10. MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT

11. PROJECT UNDER DEVELOPMENT

12. INTERESTS IN ASSOCIATES

13. STOCK OF PROPERTIES

14. DEBTORS, DEPOSITS AND PREPAYMENTS

15. CREDITORS AND ACCRUED EXPENSES

16. MOVEMENTS IN BANK AND OTHER BORROWINGS

17. DEFERRED TAX LIABILITIES

18. SHARE CAPITAL

19. ACQUISITION OF ASSETS THROUGH ACQUISITION OF SUBSIDIARIES

20. CONTINGENCIES AND COMMITMENTS

21. SIGNIFICANT RELATED PARTY TRANSACTIONS

22. COMPARATIVE INFORMATION

3. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE PYI GROUP FOR THE YEAR ENDED 31 MARCH 2008

Consolidated Income Statement

FINANCIAL INFORMATION OF THE PYI GROUP

Consolidated Balance Sheet

APPENDIX I

FINANCIAL INFORMATION OF THE PYI GROUP

Hopefluent Group Holdings Limited Proxy Solicitation & Information Statement 2009